Preamble

The House met at half-past Nine o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

BRITISH LEYLAND 1980 CORPORATE PLAN

The Minister of State, Department of Industry (Mr. Adam Butler): I beg to move,
That this House takes note of the statement made on 20 December 1979 by the Secretary of State for Industry about the British Leyland 1980 corporate plan.
We very much welcome a debate on this subject. British Leyland, with its public shareholding through the National Enterprise Board standing at more than 99 per cent., and as a recipient of massive injections of taxpayers' money, is properly the concern of the House.
The central point of the debate should be the 1980 corporate plan, with its vital importance to British Leyland. Sir Michael Edwardes and his board have stated that the strategy embodied in the plan forms the only feasible means of survival for British Leyland. I am sure that hon. Members will accept that, because of commercial confidentiality, the whole of the plan cannot be made freely available. However, they will have been able to study the report prepared by the BL support staff at the National Enterprise Board. That covers British Leyland's 1979 performance as well as the main features of the plan. That report has been laid in the Library and has also been available in the Vote Office, both at the time of my right hon. Friend's statement and in the past week.

Mr. Les Huckfield: I apologise to the hon. Gentleman for asking him to give way so early. Will he accept that we are in some difficulty? The report to which he has just referred contains only four pages, at the end, on the corporate plan, most of which was prepared on the basis of

information given almost a year ago now. Therefore, for him to say that the House of Commons has before it sufficient information to enable hon. Members to debate the 1980 corporate plan really is asking too much for the House to bear. The only information on the corporate plan itself is contained in four pages, and that says precious little.

Mr. Butler: I make it clear that it was not possible—and this follows precedent—to publish the whole of the corporate plan because of commercial confidentiality. I am sorry if the hon. Gentleman does not feel that the NEB's report covers the situation fully enough. But surely it is because of that and other things that we are having a debate today.
The hon. Gentleman pointed out that matters have moved on. Of course they have, because, as I shall point out in my speech, the main elements of the corporate plan were spelt out in September last year. That is some months ago. Therefore, it is appropriate to debate this matter today, and I believe that there is sufficient information in the report at least to appreciate the essential factors which lie behind the Plan.
This plan is like a path through a quicksand, because it offers to British Leyland a way to a secure future out of a hazardous present. It offers a way forward, provided progres is maintained and a steady nerve is kept. A faltering or wayward step could spell disaster. That, I believe, fairly sums up the position of British Leyland today.
In assessing this highly important plan, I do not intend to trace history too much. Suffice it to say that, after three years of trading profits, British Leyland was back in loss in 1979. By the end of the year, £775 million of public money, out of the £1,000 million proposed under the 1975 Ryder plan, had been committed.
Looking back at the 1979 plan, one sees a fair degree of optimism. In comparison, I judge the 1980 plan to be a sober document, even if it still expresses some underlying confidence. We should examine what has brought about that change in mood. The year 1979—the year on which the plan is based and of which details are given in the NEB report—began quite well. During the first six months, productivity, measured in output per man year, showed some improvement, especially at key plants such as Cowley


and Longbridge, and although, measured statistically, it fell some way behind the performance of some of BL's international competitiors, at least the improvement was welcome.
I want to mention especially the considerable improvement in man hours lost. In 1978, internal disputes had dropped by one-third compared with 1977. In 1979, that reduction was accelerated so that the year end figure totalled only one-third of the 1977 figure. That is a remarkable achievement, and improvements measured in that way have continued into the present year.
However, those figures were marred by the 13 weeks of the Confederation of Shipbuilding and Engineering Unions dispute which added considerably to the damage by the road haulage drivers' strike earlier in the year. Those two disputes—both of them beyond the power of British Leyland to resolve—cost the company dear. As Sir Michael Edwardes said yesterday at the annual general meeting, they cost the company over £60 million. The country as a whole and the trade union movement in particular must pay attention to those figures. It is a sad commentary that it would have been the intention of the TUC to have done further financial damage to British Leyland on the day of action last Wednesday, but in the event the vast majority of British Leyland workers turned up for a proper day's work. The engineering strike—I have mentioned the financial penalty—cost 59,000 vehicles in lost production.
In 1979, British Leyland managed to turn in a small increase in overall sales volume as a result of a buoyant market but still recorded a drop in its car market share to only 19·6 per cent. In a record year for car sales in the United Kingdom, it is nothing short of a tragedy that BL was not able to take advantage of it. A similar story exists on the commercial vehicles side, which was constrained from benefiting from a United Kingdom buoyant truck market.
Nevertheless, there were some underlying improvements within British Leyland and they were encouraging. But, as the year progressed and as we are seeing now, it seems that the new decade will prove to be an even more difficult economic environment than the late 1970s.

First, there is a slowing down in the rate of growth in the car markets of the developed world. This is already evident in the United States and several European countries, and it is now beginning to be felt in the United Kingdom.
In contrast, there is the trend among manufacturers to maximise economies of scale to spread design and unit manufacturing costs over longer production runs. That is practised particularly by multinational companies which can manufacture the same design in various countries. In a sense, the car market is now embraced by the world as a whole and these factors lead to intensified competition. British Leyland, with an older model range, has been less well equipped to cope with that intensified competition. It has also been hit by increased petrol prices, because its larger, thirstier cars, such as the Rover and the Jaguar, naturally tend to miss out in such a situation.
I should also refer to the strength of the £ sterling which, in the immediate context, must make it harder for British Leyland to compete both at home and abroad. This is a problem, as the House is all too well aware, for much of British industry, which is having to learn to live with a strong petro-pound, but undeniably it adds to the immediate burden that British Leyland has to carry.
It is reported that Sir Michael Edwardes, at yesterday's annual general meeting, made special reference to the problems for British Leyland associated with inflation, interest rates and the high pound. I assure him—as assurance has been given in the House many times before—that inflation remains the main priority of the Government's economic strategy; it has to be overcome, and certain means have to be used to overcome it. The high exchange rate is a contributor in helping towards that objective.
The world picture, the domestic and the internal situation within British Leyland demanded a complete reappraisal—a reappraisal reflected by the 1980 corporate plan. As I have already mentioned, the main changes to the structure and activities of the company set out in the plan were announced by Sir Michael when he introduced the company's half-yearly results on 10 September last year. I think that it is important that I should


quote from his statement which went out to all British Leyland employees:
 As against our level of market share, we have facilities and fixed expenses designed to cope with higher volumes … We cannot afford to spread costs and other resources too thinly over too many plants and models. In short, we must streamline facilities and model programmes and slim down the company, while bringing forward the model programme in the mid-car sector.
The chairman then went on to detail his streamlining proposals—the closure, completely or partially, of several plants, concentration of vehicle assembly on key sites and a reduction in United Kingdom manning levels as a result of these proposals by not less than 25,000 over two years. These details will be familiar to all hon. Members, and certainly to those of us who are here this morning with an immediate interest in British Leyland, and they are deployed in greater detail in the NEB report.
However, at that time Sir Michael also emphasised—this is another important point—that the company's goal had not changed: British Leyland was still aiming at longer term viability, but the route to viability was now narrow and difficult. At one time British Leyland had perhaps several options before it, but now there were only two—survival on the basis of the plan, or collapse.
It was with these points very much in mind that the Government examined the plan after they had received it from the National Enterprise Board. The House will be aware that the NEB board felt that, in the short time that it had been there, it was not qualified to comment on the plan, or form the kind of view that it would otherwise have liked to form, and how it would affect British Leyland's future, so the plan was passed to my right hon. Friend in that manner.
Whereas earlier plans relied much on optimism, the present plan draws its strength and greater credibility from realism. Part of that realism is to be found in the board's request for funds. As my right hon. Friend made clear in his statement on 20 December, the plan looks for £430 million of Government funding over the years ahead. Significantly, Sir Michael asked only for the £300 million needed for 1980–81. The Government approved that limited funding with the same realism as that with which it was requested.
With Government approval for its 1980 corporate plan, British Leyland entered the new decade. The first year of it is crucial, as nearly everyone concerned with the company realises. It is crucial that British Leyland brings to fruition its investment in the new Metro facilities at Longbridge. The plant has received a stream of ministerial and other visitors. All visitors will have been greatly impressed with the new body plan, the layout, the up-to-date facilities and the major use of robotics. We all hope that the plant will be fully utilised. The facilities provide a major hope for the future of the company and its work force. The degree of automation will improve the quality of the product as well as the working environment for British Leyland employees at Longbridge. The new facilities will certainly help to increase British Leyland's competitiveness.
It is crucial for British Leyland to maintain its market share in 1980. Even if a company produces the best product in the world and it does not sell, that company is out of business. The new Morris which is to be forthcoming this summer to replace the Marina should give a welcome boost to sales. It is vital that the Metro, on which so much money has been spent, gets the chance that it deserves with a sound market base for British Leyland products generally. The company says that that programme is fully on schedule for a launch in the autumn.
It is crucial for British Leyland to maintain its cash flow in 1980. That was pointed out graphically in Sir Michael's letter to my right hon. Friend of 19 December which was published in the Official Report. The position has not changed. Progress on the corporate plan cannot be maintained in the face of a significant shortfall in cash flow. That must be accepted if the company is to survive 1980 in the form envisaged by the board.

Mr. John Bruce-Gardyne: I hope that my hon. Friend will tell us a little more about the concluding comments in the corporate plan about British Leyland's future financial duty. The corporate plan states:
 It is clear that BL will not achieve a return on assets of 10 per cent. in 1981. However, the plan suggests that BL will achieve its financial duty in 1982 and that it will then


be on course for achieving its longer term objective of a return of 15 per cent.
Sir Michael's comments yesterday do not make the position sound like that.

Mr. Butler: My hon. Friend should look at that part of my speech in which I refer to the intense realism shown by Sir Michael in his application for funding for 1980–81 only, despite the forward thinking in the plan, and to my remarks about the realism of the Government's acceptance of that funding for that period. We all recognise that British Leyland is facing an extremely difficult commercial time and a thoroughly difficult financial time.
Yesterday Sir Michael drew attention to many of the difficulties. However, he expressed an underlying confidence that the company can survive provided that the improvement in industrial relations is maintained and that suppliers do not pass on inflationary wage settlements. With those provisos, he can look forward to attaining the return on assets referred to in the corporate plan. My right hon. Friend and I are probably as realistic as anyone. My hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) should not press me harder at present. There has to be confidence in the present management. I believe that it is taking the necessary steps. If the momentum is maintained, the future is there and the investment will pay.
There have been some encouraging events since my right hon. Friend's statement. The Honda deal, signed at the end of December, is of great importance to the future beyond the Metro launch because it provides another new car to fill a gap in British Leyland's fleet. It enables British Leyland to concentrate its design and engineering resources on the next major step—a new medium-sized car. The Honda deal is an excellent example of international collaboration. Many leading companies in the world motor industry have fixed up similar deals. British Leyland cannot afford to be an exception. I understand that the plan is to investigate, and proceed if appropriate with, further collaborative activity of different types.
I turn to the question of the market share. The performance was depressing

in January and February. However, the sharp come-back in March was welcome. If the market share can be retained, it will go some way towards providing the firm basis needed for the Metro launch.
There is tangible evidence that British Leyland's investment programmes are coming to fruition, with the two new truck series produced this year by Leyland Vehicles. The Landtrain was introduced in January. It is a robust heavy duty truck developed specifically for developing countries. The prospects are good. That was followed by the T45 truck called the Roadtrain. Trade response so far has been favourable and there are high hopes that the new truck will sell well at home and abroad, reversing the present downward trend in market share. The new products, together with Leyland Vehicles' bus products in which BL is a world leader, have put the company on that side in a good position to prosper throughout the 1980s.
There is another encouraging sign. In his statement, my right hon. Friend said that he was looking to British Leyland to contribute to its funding needs from internal resources, including disposal of assets where that made commercial sense. The board is fully alert to the need to raise money in that way. Proof of what the board is prepared to do when a deal makes commercial sense is shown in the agreement that was made in principle in the arrangement with Aston Martin Lagonda about the future of the MG plant at Abingdon. That agreement in principle provides a welcome conclusion to an issue about which many of my hon. Friends have been concerned.
I now turn to the question of progress on implementation of the pay and working practices package. Many British Leyland employees have not welcomed the details of the package. It is difficult to accept change, and a demand for an element of sacrifice, especially if that demand is compared with the pay increases that some other workers achieve. However, unless British Leyland can contain its costs, jobs will suffer. The way in which the vast majority of the work force has responded to this package is evidence that it accepts this fundamental truth.
We should also be encouraged because the problems encountered on the pay


package have so far been resolved by negotiations. The next few months will not be easy. However, reasoned discussion and co-operation should be the norm. That will be to everybody's benefit. These events give grounds for hope. They are very welcome. As I said to my hon. Friend the Member for Knutsford, we all need to be intensely realistic about the situation. The time taken to reach acceptance of the wages and working practices package was time lost to the vital job of producing and selling motor cars.
British Leyland's low market share of January and February only made a difficult financial position more precarious. I have already referred to the effect of strikes, both external and internal. The steel strike caused British Leyland more problems. The problems of maintaining British Leyland's recovery programme, against a background of world-wide recession, have been well illustrated by the events of March. After two months of good production, British Leyland had to lay off workers because sales had been poor and stock levels had built up.
I experienced the management's determination when I visited Longbridge and talked to members of management earlier in the week. The determination of management and of the vast majority of workers at British Leyland has enabled them to weather those problems. As each problem is added, there is a cumulative effect that cannot be ignored or minimised.
British Leyland is not yet out of its difficulties. Any setback could be fatal. The chairman of British Leyland wrote a letter on 19 December which recognised that hazards existed both within and without the company. The board said that the future of the plan would be thrown into jeopardy by shortfalls in performance or by shortfalls in the cash flow. Everyone must be aware that, if British Leyland cannot sort out its problems, it will not be in a position in the 1980s to compete either in the United Kingdom or internationally.
The board believes that the problems will be sorted out and that British Leyland will be able to compete. That is why Sir Michael Edwardes has announced, in a most welcome step, that he will stay with the company beyond October

of this year. That is why there is a fresh spirit and determination among the work force. That is why the Government approved funding for 1980. I am glad to say that I detect a new willingness on the part of British people to take British Leyland seriously and to stop knocking it. There is a new willingness to respect its achievements. For the sake of the country and of the company, let us hope that all faith is not misplaced. We must hope that the company can succeed.

Mr. Les Huckfield: On behalf of the Opposition, I must say that we would have preferred a proper debate on British Leyland. It was not our idea to debate the British Leyland corporate plan on a Friday. We protested against the Government's intention to hold the debate today. It has placed many of my right hon. and hon. Friends in severe difficulties. Many of them had transport difficulties earlier in the week.

Mr. Hal Miller: I wonder why.

Mr. Huckfield: Many of my right hon. and hon. Friends have to be in their constituencies today. On behalf of the Opposition, I give notice that we do not consider that the subject will have been properly debated. We expect a complete debate at a later date. I shall ask my right hon. and hon. Friends to take note of the Minister's remarks. However, we hope and expect there to be a fully furnished and equipped debate—as we are working with incomplete information—at a proper time during the week.
I am an ardent supporter of British Leyland's products. I have an Austin Princess in the garage downstairs. I have put 24,000 miles on the clock since last October. I have not had any trouble. I could tell the same story about all the other British Leyland cars that I have had. I therefore speak as an owner and proud defender of the products made by British Leyland, and by my constituents. All my right hon. and hon. Friends hope that the company will survive, and that it will go from strength to strength. We hope that it will take its rightful place as part of the world motor manufacturing scene.
We want British Leyland to survive, and to go from strength to strength.


We want it to do so in a big way. However, it is our duty, on behalf of taxpayers and on behalf of our constituents, to criticise constructively. About 25,000 of my constituents in Nuneaton and Bed-worth are directly or indirectly tied up with British Leyland. We must therefore ask the Government whether they want British Leyland to survive. That has hardly emerged from the Minister's statement. Both the Minister and his right hon. Friend the Secretary of State for Industry say that British Leyland must stand on its own. I know that they will have the support of the hon. Member for Knutsford (Mr. Bruce-Gardyne). If that is their attitude, I must tell the Government that the Opposition will take a different line.
All other major motor manufacturers enjoy considerable support from their Governments. This Government propose to pursue a different policy. It is our duty to point out to taxpayers, constituents and customers just how different that policy is.

Mr. Bruce-Gardyne: The hon. Member said just now that British Leyland's competitors around the world enjoyed considerable support. Can he mention one car manufacturer anywhere in the world that has already taken £1,000 million from its taxpayers?

Mr. Huckfield: If the hon. Member cares to total up the support that Renault has received from the French Government, if he cares to examine the support that will be given to Chrysler in the United States, if he looks at the other support which has been given through the Japanese banking system and to Volkswagen in various forms of regional aid, he will see that the sum that we are discussing for British Leyland—which is not a grant or a subsidy, but a loan on which interest must be paid—is not at all out of line with those sums given more generously by other Governments.
We are in some difficulty in this debate today because we do not have the information. The Minister referred to the document that was put in the Vote Office and the Library last December. If one looks at that statement, supplied by the British Leyland support staff of the National Enterprise Board, one sees that it was prepared last December, before the

Secretary of State's statement just before Christmas, and that most of the information contained in that mere four pages at the back of the statement on the corporate plan was based on information gathered six months previously.
This is another reason why we shall ask for a proper, fully-equipped debate. This morning we are debating the 1980 corporate plan of British Leyland on the basis of a mere four pages of words, with hardly any figures at all, on information that was prepared at least a year ago. We do not consider that to be equipping the House of Commons with sufficient information. We are talking about a company which has had committed and pledged to it £1,000 million of taxpayers' money. We are talking about a company into which the Secretary of State has announced that he will inject £300 million of new money. We are talking about a company which has already received a tremendous amount of Government support and all that we have for the debate this morning is four pages at the back of an NEB report, which is at least a year out of date.

Mr. Adam Butler: The hon. Member is making rather a meal of this. The House has had available to it the report and accounts of British Leyland which go into considerable detail. We are also extremely fortunate to follow by one day the annual general meeting of British Leyland, at which the chairman gave a review of the present situation and was asked questions. We can draw information from that. The hon. Member should move on to make some remarks about the industry instead of making too much of a meal about this point of information.

Mr. Huckfield: The Minister is in danger of misleading the House. The information that I have here—the British Leyland Limited report and accounts 1979—coincidentally appears before the House this morning only because the annual general meeting of the company was held yesterday. The only information that was available before that meeting was a short press statement of last year's results which was given by the company in March. In fact, it was not until the annual general meeting yesterday that the report appeared. That is far too short notice. I do not want to


dwell on that point, but I must protest at the fact that we are having this debate today on the basis of insufficient information.
The statement issued by the National Enterprise Board talks about a build of some 900,000 units. That figure is on page 15 of the statement about company utilisation. Of course, that has been overtaken by events. We are now talking about a build of only 750,000 units, if that. I see that Mr. Ray Horrocks told the press conference yesterday of a total United Kingdom vehicle sale this year of 1·4 million car units. He might also have included the fact that the total number of units sold in this country that were actually built in this country might be less than 600,000 this year. How has that 600,000 figure been worked into the 1980 corporate plan when the reference that we have here is to 900,000 units? This shows that the forecasts must have been changed quite dramatically since the NEB information was prepared.
Both the Metro build and the Honda build have been reduced. One of the variants of the Metro will not now be produced. I give those as examples, and I can give many others, of the forecasts being utterly and completely out of date.
I thank the company for the helpful information that it has given me as the Opposition spokesman. But that does not help my colleagues—my hon. Friend the Member for Birmingham, Stechford (Mr. Davis) who has been very much involved in the motor industry, and my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman), who has as many constituents involved in British Leyland as I have. It is very good of the company to help me as Front Bench spokesman, but I only wish that the Government had been just as helpful to my colleagues.
Having said that we would have expected more information and that we still want a proper debate on the company, I shall now concentrate the Minister's mind for him, because on many occasions I wondered what company he was talking about. After all, British Leyland is possibly the smallest and the weakest of the world's major motor manufacturers. It is only one-quarter the size of the leading European car manufacturers. It is only one-twelfth the size of the world's leader,

General Motors. It is a company which is desperately short of new models and which has seen many dealer defections. It is also a company which faces, as does the whole of Europe, a possible market fall of at least 5 per cent. this year. It is probable that there will be no upturn in that market until at least 1983. It is a company that is very much exposed to short-term shocks.
While we recognise that the company has achieved a 19 per cent. market penetration in the first three months of this year, a great deal of that has been achieved by heavy promotional expenditure which every other motor manufacturer is using. I hope that the Minister will recognise that if Michael Edwardes was able to boast yesterday about a 20 per cent. market share in March, that kind of share was achieved because a great deal of propaganda and promotional spending has been done.

Mr. John Patten: I do not disagree for one minute with the general drift of the hon. Member's comments. He has given a straightforward description of the present state of the company. Does he agree that British Leyland has a dealer network of some 1,900 outlets, which is considerably more than Ford, and that in recent months, while some dealers have gone from the BL network, others in rural areas have been recruited?

Mr. Huckfield: British Leyland still has a substantial dealer network. The question arises whether it can be maintained. The critical factor will be the building and supplying of the LC10.
Regardless of its critically exposed position, the company is our largest manufacturing exporter and earner of foreign currency. It should not be left to stand on its own. The Government should be much more positive. In a world where most of the major competition is much larger, the future of British Leyland probably lies in a network of international collaboration. We are not against British Leyland collaborating with other manufacturers. The issue is on what terms. From what we know of British Leyland, and from what the hon. Gentleman said this morning, it does not have much to bargain with. Protectionism would give British Leyland more of the bargaining power that it needs.
I have always opposed the Edwardes


strategy of retrenchment, and I make no apology for that. I have tried to expose the flaws in Sir Michael Edwardes's plan. However, I want British Leyland to survive. I want the 1980 plan to work and the planned model range to be put into full development.
Because of decisions taken at the Government's behest, I am worried that the company is dangerously exposed. For example, why does British Leyland have to put so much of its sports car production at risk? Throughout the United States, at whatever price, there is a definite market for British sports cars—the MG, TR7 and TR8. Sir Michael Edwardes has said that the company is making a loss on the MG, but that market could still be satisfied. Unfortunately, because of the sale of the MG works at Abingdon and the transfer of TR7 production from Canley to Solihull, that profitable market could suffer interruption of supply. Despite the success of Jaguar and Rover, there is no hint of a Jaguar and Rover replacement. Castle Bromwich has currently been supplying at least four plants with bodies, but an integral part of the Edwardes plan is to close it down. About £30 million was spent on modernising the plant, with a paint shop and other equipment. Those factors lead us to be severely critical of the plan.
We are dangerously dependent on the LC10 coming to fruition in order to cope with what by 1985 will be about 54 per cent. of the market. If it does not come through properly and on time, British Leyland will be in severe difficulties, if it is able to continue as a major motor manufacturer. I make those criticisms based on information supplied by many people in the car industry. They, too, cannot see how the plan will work.
Indeed, in the past anyone who has tried to analyse the Edwardes plan has been warned off. Television producers and serious and informed press commentators, who wanted to do a constructive analysis of the Edwardes strategy, have been dissuaded, fobbed off or warned off. I hope that we shall have the serious analysis that the company deserves when we get the full debate for which we are still asking.
The previous Labour Government heavily supported the company and committed

about £1,000 million. Significantly, in October 1979 the company went to the Government with the Confederation of Shipbuilding and Engineering Unions and asked for £2,000 million for model development It felt that it needed that sum to enable the planned model range to be developed. The hon. Gentleman appears to have concealed from the House the fact that, although the company and unions asked his Department for £2,000 million last October, they got only a mere £200 million from the Secretary of State in new money just before Christmas. As the Secretary of State said, most of that was for additional compensation for closures and redundancies. Is this the end of Government support or will more money be put into British Leyland?

Mr. Adam Butler: I do not know how the hon. Gentleman has dreamed up the figure of £2,000 million. The chairman of British Leyland drew up his plan not at the behest of Government but on the position as he saw it. There were certain sums of money that he thought were necessary for the future. Sir Michael Edwardes asked the Government only for the necessary funds for 1980–81.

Mr. Huckfield: The company and unions agreed that the planned model strategy needed an expenditure of £2,000 million until 1985. The only response that the Government made just before Christmas was a mere £200 million. Page 5 of the annual report says:
The Company has indicated that further funds will be required between 1981 and 1983 to carry through the Corporate Plan.
I wish that the hon. Gentleman had been a little more forthcoming on that this morning.
The Government have been niggardly, and we are worried whether the depreciation allowances—the return that the company can expect—will be sufficient to generate the investment capital required. Ford, for example, has probably calculated that it needs about £400 million gross profit for its replacement investment. If Leyland is to go in for a similar pattern of investment, it may need a similar gross trading profit. There are then the losses which were announced in more detail yesterday. That is the investment strategy and profit expectation of another major motor manufacturers. The


Government treat British Leyland as though it has to limp from year to yeaar. It is ridiculous to expect our major manufacturing currency earner to limp along on a hub cap and a prayer from year to year. When the company has to plan from model to model, year to year, almost month to month, because it does not know the Government's intention, the situation becomes ridiculous.
The trade unions wanted to see a longer-term commitment by the Government to British Leyland's future, and the shop stewards produced their pamphlet. I wish that the Government would study the pamphlet in more detail. On the bottom of the controversial page 13, there are figures that sum up the whole argument. They show conclusively that all our major motor manufacturing competitors have an annual investment per head and in total at least twice that of British Leyland. That is the basis of the shop stewards' argument. If we are to enable the company to survive we must ensure that it gets the investment that other Governments ensure that their vehicle producers enjoy.
The shop stewards do not oppose international collaboration. They realise that such collaboration and further investment are necessary. That is why they produced their pamphlet.
I wish to say a few words about what we understand to be the facts and figures in the corporate plan. I have to say that we understand them to be the facts and figures, because we do not have the plan before us. I understand that it makes an assumption that inflation will continue at 15 per cent. and will be down to 12 per cent. by 1985. However, the most recent figures show that inflation is running at about 21 per cent. What adjustments will the Government and the company make to the corporate plan in the light of their wrongly calculated inflation figures?
What adjustments will be made in the light of the fact that interest payments are running at about 2 per cent. of sales? That is a vastly different situation from those of most of British Leyland's competitors, which have a positive interest rate relationship. In 1978, BL's interest payments totalled about £56 million.
Bearing in mind that the LC10 critically depends upon the cash flow of the company, which is about 2 per cent. of

sales, compared with cash flows of between 6 per cent. and 10 per cent. among major competitors, which thereby generate the investment that they have planned, some alteration will surely have to be made to the corporate plan in the light of those cash flow difficulties.
The company has complained about the exchange rate, and even the Minister referred to that subject. We also have a 5 per cent. market decline for the whole of Europe. Surely that requires some alteration to what we understand to be the corporate plan.
Is it a fact that British Leyland will find great difficulty getting the Honda into France? The Honda planned build has already been reduced from 90,000 units to 70,000. If the company cannot get the Honda into France, the planned BL-Honda car at Cowley could become increasingly competitive with the Metro. How do the Government see that situation? Inward investment has been planned on a collaborative basis with the Japanese, but it may have to compete with the company's planned Metro output.
What standby guarantees might the Government be prepared to give to the LC10? The Minister has constituents working in the car industry and he knows a fair amount about it. Having had difficulties in planning expenditure on the LT80 gear box and the O series engine and knowing that the LC10 is critical for Leyland, because it will ultimately replace both the Princess and the Marina in that middle range segment of the market, what will the Government do if the LC10 does not go ahead? It will mean that Leyland will not have a new model programme in the biggest and fastest expanding part of the range. The Government must comment on that. As I said to the hon. Member for Oxford (Mr. Patten), if the LC10 does not go ahead, particularly as a British car, it will be difficult for the company to hold the confidence of dealers and components manufacturers.
Those are questions which must be answered on what we understand to be the corporate plan. I say again that we are hampered by not having the corporate plan before us.
We believe that, if the plan is to survive, something will have to be done


about imports. We have an understanding with the Japanese that they will not take more than about a 10 per cent. share, but the biggest increase in import penetration has been by European multinationals and some Comecon countries.
Sir Michael Edwardes said in his speech yesterday that Britain is a profitable market except for those who make cars here. Japanese profits from this country have almost quadrupled. We are a lucrative market because of the exchange rate and other factors, and adjustments will have to be made to the corporate plan in the light of that fact.
Even if we applauded the corporate plan—which we do not—we feel that some standby credit should be provided by the Government to ensure that British Leyland is better able to withstand any short-term shocks.
We also believe that there needs to be an improvement in the attitude of the management. Such a company cannot be run by continually putting the jobs of middle and senior management on the line and by imposing wage deals and working conditions on the trade union movement. The company needs the cooperation of the trade unions.
I was glad that the Minister mentioned that, as Sir Michael Edwardes pointed out yesterday, there was a 52 per cent, reduction last year in the number of man hours lost. Even page 8 of the NEB statement refers to the fact that the number of man hours lost last year was only one-third of those lost in 1978. There has been a significant improvement.
On the basis of my contacts with many of the trade unions involved, I can say that every steward, convenor and national union officer wants to see that improvement continue and wants to see the company go on from strength to strength. The AUEW and ASTMS have given their broad endorsement of what they understand to be in the corporate plan, but, of course, the TGWU and TASS find great difficulty in accepting the plan and are severely critical of it.
The management cannot afford to go on riding roughshod over the view of such unions. The active opposition and constructive criticism of the union that represents 75 per cent. of the British Leyland work force must be recognised by the

management and discussed with the union. All the trade unionists want to see the company survive. Above all, they want to see the Metro launch succeed, the Honda deal go through and the LC10 launched.
Let me put the matter in more of an international perspective. We want British Leyland to survive not only for domestic manufacturing and employment reasons, but because of its position in international motor manufacturing. As I told the House on Tuesday, many of us believe that, because of the Government's decision to impose sanctions on Iran, there is a possibility—I put it no higher—that Talbot could pull out of this country completely. That would leave the British car industry dangerously dependent on American-based and dominated multinationals which have an internationally complex manufacturing pattern.
Volkswagen produces for the EEC in Brazil, Fiat produces in Poland, Ford produces in Spain, Renault produces in Romania, and General Motors produces in Ireland. A Volvo sold in this country has a higher British content than does even the Ford Granada. Those are indications of the internationally complex pattern of production.
We now find that it is probable that Ford will not produce more than about 400,000 units a year in this country. In the case of General Motors, of course, the Chevette is the only car which is properly made here. If that is followed by the T-car, there is no guarantee that that will be assembled here.
In a very complex international manufacturing pattern of trading, that is the context into which British Leyland has to fit.

Mr. Bob Cryer: Does my hon. Friend accept that even the present Government have understood that it is not enough simply to leave external trade in the textile industry to market forces and that the multi-fibre arrangement is one which they have up till now at least endorsed? If the motor manufacturing industry, on which so many jobs in both engineering and textiles depend, continues to decline, some quota arrangement and some international agreement on imports will have to be undertaken.

Mr. Huekfield: My hon. Friend has given me an excellent lead into my next


point, which is to refer to the policy of the Transport and General Workers Union and, indeed, of the Labour Party since that policy was adopted by the National Executive Committee a couple of weeks ago.
We believe that we shall have to move towards some form of protectionism. If my hon. Friend consults this morning's Financial Times he will be interested to see three different stories of international collaboration or of moves towards some kind of protectionism. This is the way that the rest of the world is going.
It is interesting to note that General Motors has to export from Austria. That is a condition for General Motors being allowed to manufacture in Austria. Ford has to export from Spain. Volkswagen has to export from Brazil. The French Government heavily protect Renault; and actively and continuously they are putting money into PSA-Citroen. The Italians have a very effective restriction against the Japanese. The Germans and the Japanese have some very effective trictions on imports, my hon. Friend the kets. When even Ford and the UAW in the United States are demanding restrictions in imports, my hon. Friend the Member for Keighley (Mr. Cryer) is right to make the comment that he does because that is the way that the rest of the world is going.
It is into that kind of drift towards protectionism, coupled with an intricate and complex international pattern of manufacturing and trading that British Leyland has to fit. That is why the Transport and General Workers Union and the Labour Party have put forward the policy that by 1982 all cars sold here must be assembled here. They do not think that that is completely impracticable. By the time that Michael Edwardes has carried out his rationalisation programme the capacity will be there. It will be fairly easy initially for some of those who sell cars here to set up KD or CKD assembly units here, as PSA-Citroen does already at Ryton and as the Japanese will be doing at Cowley as part of the Honda deal. That policy is not impracticable. It is inherently practicable. It is being done already by the French and Japanese here, and it is being done already by other major motor manufacturers all over the world.
It would also be well in line with the

policies already being practised by many of our major competitors. We have an effective French restriction on Japanese penetration. The French have effectively curtailed it to about 3 per cent. Spain is fairly effectively closed to all kinds of imports. The Italians already have their quota on with the Japanese, although that may have to be renegotiated following the Alfa deal with Nissan.
That is what is happening already in the rest of the world. Our proposal is not entirely novel. If it were adopted, we should simply be following the patterns and precedents set elsewhere.
That kind of policy has to be pursued in conjunction with a strategy for the revival of and reinvestment in British Leyland, provided to a large extent by Government finance. However, the Opposition accept that it is not just a matter of the Government putting more money into British Leyland. That alone would not do it. That alone would not ensure the survival of British Leyland. If we could get back to the Ryder strategy of 33 per cent. of the market, we do not believe that that by itself would be enough.
We accept that British Leyland has to be part of some international collaborative deal. However, we do not believe that if British Leyland is to drift more and more, as it shows signs of doing, to being an assembly-only operator, that will guarantee the future of British Leyland and the British components industry. The difficulty is that if British Leyland concentrates only on assembly, importing the power train and other more advanced technical parts of the car, as with the Honda deal, we shall lose the skilled people we need for the more technically advanced parts of the car and we shall put a severe strain on the components industry to adjust to that.
To survive, we believe that British Leyland will have to go forward on the basis of collaborative partnership and more protection. That is the policy being pursued by all other Governments. It is the policy being pursued by all other major motor manufacturers. But even if this Government cannot accept that, and even if they cannot accept the mixture of protectionism and increased Government funding which I propose, I am sure that the Minister will agree that to protect Leyland from some of the


short-term shocks and exposures to which it may be subjected, some kind of standby credit facility and understanding should be available.
I say that especially in respect of the LC10. To survive and to be taken seriously as a major motor manufacturer, Leyland will desperately need the LC10. If it does not proceed with the LC10, it will not have a vital new model for a large section of the market and it will also find the components industry, the dealers and the customers losing confidence in the company. If a collapse of confidence takes place, with an accompanying collapse of confidence in the components industry, we may lose not only Leyland but many other parts of the components industry and many other assemblies as well.
I hope that the Minister will be able to comment on the standby facility which we think is necessary even in his strategy. I hope, too, that he agrees that we want to see an increased Metro build and an increased LC10 building programme. We believe those factors to be necessary even in his plan.
Above all, we ought not to debate British Leyland in this kind of atmosphere on a Friday. We want a proper debate. We want adequate information. Most of the information that I have been fortunate enough to have given to me and which I have been able to provide to the House this morning is not available to my hon. Friends. I regret that. If the Government think that they can get by with debating the affairs of our major motor manufacturing exporter and currency earner on a Friday with four pages of information which is at least a year out of date, they insult the House of Commons.
We want a proper debate. We want to see British Leyland survive. We want to help British Leyland to survive. But we have to ask the Government whether they want to see British Leyland survive.

Mr. Hal Miller: Listening to the hon. Member for Nuneaton (Mr. Huckfield"), one begins to understand the Australian expression " wingeing Poms ".
Hon. Members know that the hon. Gentleman is wingeing because the

Conservative Government provided the funds that BL requested for it to continue in production. The hon. Gentleman is wingeing because the work force did not follow the advice of leaders of his union, in particular, but accepted the plan for the survival of the company. He is wingeing because the work force accepted the pay and conditions of work, again despite the opposition of the union leaders. He is wingeing because the day of action failed to stop production at BL, except in Glasgow. He is wingeing because there is, once again, management control of the company and Mr. Robinson, instead of taking his case on time to the tribunal, thought he could exercise industrial muscle to prevent the company from moving on to successful realisation of the plan. The hon. Gentleman has talked of " no go " areas in the West Midlands. He has done his best to make certain that nothing goes in the West Midlands.
I should like to confine my remarks to four aspects of the company: the context in which it finds itself, the dealer network, the question of imports, and the necessity for some kind of collaboration, on which I find myself very much in agreement with the hon. Member for Nuneaton whose knowledge of the industry is profound. One only wishes that his contribution had been more constructive.
I share the hon. Gentleman's surprise that the debate is being held today, but not simply because it is a Friday. I am surprised that it is being held at all. It does not seem to me an opportune moment for the debate. There are no land marks. There is no decision point on which it is possible to bring debate to bear in order to influence the outcome.

Mr. Bruce-Gardyne: Is my hon. Friend seriously advancing the proposition that taxpayers should be dunned for £300 million without any discussion?

Mr. Miller: The taxpayers are not being dunned. The money advanced has been the final instalment of the Ryder plan for which this House gave approval several years ago. I am in favour of a serious discussion on how nationalised industries should be financed and the relative priorities that should be accorded to the motor industry as against the


steel industry, British Rail or shipbuilding. I had not intended to go so far in my remarks. I hope, however, that some hon. Members will take up that necessary discussion. It is not clear to me that there is a coherent Government policy towards the financing of these industries.
It does not seem to me that the present situation calls for a debate. It should have occurred, I agree, in December when the statement was issued, at a time when the information available would have been more up to date. We are fortunate, however, that the company held its annual general meeting yesterday and that the chairman illustrated the context for us. He rightly drew attention to the difficulties being caused to the company and all manufacturers by the present high exchange rate, high interest rates and high inflation rates.
We should take on board and pay tribute to the improvements that have taken place in BL over the past year. My hon. Friend the Minister of State mentioned the greatly improved industrial relations record. This has been achieved despite the efforts of the hon. Member for Nuneaton, but with some statesmanlike assistance from the AUEW that has shown a most refreshing grasp of the situation and a determination to move forward into the future. In contrast, the hon. Gentleman's union has concentrated only on the arguments of the past and on the assumption that a great deal of money will cure everything.
One of the difficulties of which the hon. Gentleman must be aware from his knowledge of the industry is that the company simply does not have the engineering and human resource to deploy vastly increased sums of money at this stage.

Mr. Ernie Ross: The hon. Gentleman seeks to suggest that my hon. Friend is among the few people in the country who believe that the plan put forward by the Leyland shop stewards, his union and my union is not likely to succeed. Would he comment on the " Weekend World " programme, hosted by Brian Walden, that came to exactly the same conclusions, if there is to be an indigenous motor car industry in this country?

Mr. Miller: I did not see that pro gramme.
I wish to continue to highlight the improvements that have been made and to point out that productivity at the Long-bridge factory is at the moment equal to the highest in Europe. This should be taken on board. I agree very much with the Minister of State that we must get out of the habit of regarding BL as a sick Joke. There is real, concrete achievement. The Minister and some hon. Members have seen the Metro line there and the new investment. Even more striking to anyone who has paid a recent visit is the great improvement in morale of management and work force, who at last see a real possibility of successful volume production and are concentrating their efforts to that end.
Part of the context of this debate is the heavy losses that have been made. It should be borne in mind that similar experience is being shared by motor manufacturers all round the world. I have a large list illustrating the situation in other countries. The hon. Member for Nuneaton mentioned MG and talked about a profitable market. The losses on every MG being sold in the United States are colossal. The stocks are enormous. There would not seem to be the demand that he suggests.
Even if the hon. Gentleman is correct, the deal to ensure the future of MG is being held up by the reluctance of the consortium and not, as my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) has tried to suggest, by the reluctance of the BL management. Unless the consortium can reach a decision fairly quickly, I fear that there will be a serious threat to continued production of the MG and employment at the Abingdon plant.
I wish to move on to the subject of the dealer network. Following my remarks about the improvement in manufacturing and of attitudes in the company, it seems that the main question mark over the future of the company has now moved from the manufacturing side to the dealer network and the sales side. I should have welcomed some information on the dealer network in the document about the corporate plan. I am concerned how the dealer network is to be maintained. One


can readily understand that a network established to sell 35 per cent. of the market and now with a throughput of only 18 per cent., on average, will have great difficulty in financing the considerable fixed investment necessary to bring about the improvement in quality that is now being achieved.
The dealers are vitually dependent on the new models. They need to have confidence that they can survive until the new models come through. There was a misleading article recently in the Economist on dealers' margins. It suggested that they are 20 per cent. I think that the correspondent must have misunderstood the position and must have been referring to the gross margin. Even so, he exaggerated the margin considerably. My understanding is that the net margin in a dealership is about 4 per cent. We must consider the continued viability of the dealer net work.
The network is not getting a profitable new model until nearly the end of the year. That will be only one car and not a product range. It will be a smaller car and the dealer margin will, therefore, be smaller. There must be continuing doubts about how the dealers will sustain their sales operation so that they are able later to sell the increased volumes that we hope and expect will result.
I cannot share the prescription on imports of the hon. Member for Nuneaton. We all need to take on board what is happening in the import market and the threat that that poses to entire United Kingdom production and not only that of BL. Yesterday Sir Michael Edwardes referred to the exchange rate and the fact that margins for importers had effectively been doubled for other European manufacturers and quadrupled for the Japanese.
My research shows that the margin on a cheap Japanese model such as the Datsun Cherry is about £600 per vehicle, which is significant. In Japan there is currently being installed additional capacity for up to 2 million cars a year. It is already the largest manufacturer in the world. One can only fear that the extra capacity is intended for the export market. Japan already exports 50 per cent. of its production. There is a real fear among all manufacturers that the extra production is largely intended for the

European market. I must ask my hon. Friend the Minister of State to institute discussions on a European level to ascertain what view Governments should be taking about the imbalance of trade.
I do not want to detain the House much longer, so I shall not go into all the reasons why Japanese vehicles are so much more competitive. Only about 50 per cent. of the reason lies in automation. The remaining 50 per cent. is due to various work practices and the organisation of production. They have only one half day spare and on an engine line only 40 castings at the start of the line and one hour's supply of engines at the end of the line.
Japanese imports are increasing in areas that are directly threatening the investment made on behalf of the taxpayer in BL. I refer especially to increased Land-Rover production. The import of four-wheel drive vehicles from Japan has increased dramatically. It doubled last year and it now accounts for about 30 per cent. of the total United Kingdom market. At the same time we are facing the prospect of greatly increased imports of four wheel drive vehicles from Eastern Europe. I do not wish to go into the political arguments and revive discussions about the Olympic Games and whether the Government should be seen to be taking some other concrete action rather than merely asking our athletes to abstain from going to Moscow.
The importance of Eastern European imports is that they are concentrated at the bottom end of the market. When I asked the previous Labour Government about these imports, I was always brushed off with the reply that they amounted to only 1·6 per cent. or 2· per cent. of the market, that they were not significant and that there was nothing to worry about. However, if one does a little more work and examines where the incidence of these imports lies, one finds that they account for 25 per cent. of sales in Britain of cars costing less than £3,000. They are a significant market force in that sector. Further, they act to depress the profitability of superior models because they are equipped and specified at a level that in Europe is reserved for the next higher range of car. They are, therefore, seriously affecting the price structure in the market.


Eastern European imports of cars last year were equivalent to the BL production that was lost when the company had to lay off the work force in February and March because of excess stocks.
Increased capacity in Spain means that Spain equals and will soon outstrip production in Britain. It is a heavily protected market. The rate of duty or tax is 63 per cent. Local manufacturers are allowed to import models not produced in Spain to complete the range without payment of tax. There is no reason to allow this discriminatory state of trade between Spain and Britain in motor vehicles. I say to my hon. Friends on the Treasury Bench that, in concert with our European partners, serious attention should be given to the question of the policy that European Governments should adopt towards Japanese motor imports. Europe should be taking action against those politically priced vehicles that are damaging the very investment that the British Government are making with British taxpayers' money. There should be a more realistic balance in the terms on which we trade with Spain.
Europe is one of the world's growth markets. It is estimated to increase at about 3 per cent. per annum. However, the United Kingdom industry and the United Kingdom market are too small to support a full product range. We must consolidate and repay the efforts being made in the company by the management and the men to " recreate it," to use Sir Michael Edwardes's phrase, by giving support to collaborative ventures which can secure the industry's long-term future.
The Japanese venture with Honda is by no means sufficient. Part of the answer to the question posed by the hon. Member for Nuneaton about the future of the LC10 and its funding is, realistically—I have been saying this for a long time—that it will need to be secured on a collaborative basis.

Mr. Les Huckfield: The hon. Member has raised an important point. Does he not understand that in the components industry and among the dealers there is a great fear that the LC10 will be outsourced and bought out? If, for example, the LC10 has a foreign gearbox, a foreign engine and roughly the same percentage of foreign components as in the Honda deal, does not the hon. Gentleman understand

that that could cause a complete collapse of confidence in the components industry and among the dealers? It is vital that the LC10 goes ahead and is seen as a British car.

Mr. Miller: I am aware, in the interests of my constituency, let alone as a result of my personal interest, of the importance of the components industry. I did not intend in this debate to examine the components industry. What I say in the context of collaboration, if not for the LC10 then certainly for future models, is that we need to improve the technical and engineering resources currently available to the company. That is mentioned in the company plan at paragraph 45 which deals with augmenting the technical resources of the company.
In his speech yesterday, Sir Michael Edwardes made it plain that such collaboration is an essential element in the recovery of the company. I welcome that because cars are now being made on a European scale. For that reason, I part company from the hon. Member for Nuneaton on the issue of import controls. It is no longer realistic to conceive all the English companies manufacturing a full range of products. There will have to be European-based production in order to have a full product range. It has always been my worry in relation to the future of BL that neither the Ryder plan nor any subsequent Government action—this is not a political point—envisaged the need for that. I think that it is the only way of securing the long-term future of the company.
I welcome, somewhat reservedly, the the chance to discuss the affairs of British Leyland. I think that it is better for the debate to have taken place on a Friday in a less political atmosphere, thus enabling issues to be discussed on a more factual basis. I also welcome the support that the Government have given to the company, just as I welcome the presence of two Ministers who have had practical experience in industry.
The problems to be tackled centre on the issue of imports. The company will also have to deal with the need for collaboration with other countries. Apart from the general problems which the Government are tackling in a most resolute way there are the problems of the inflation rate and high interest


rates. We should all pay tribute to the efforts and achievements of those who work in British Leyland and the great steadfastness which has been shown, in particular, by the work force, despite a great deal of provocation and politically motivated but misguided leadership.

Mr. Julius Silverman: I join in the criticism of the timing and scope of this debate. Not merely are the facts of the report somewhat out of date—time has marched on—but, as the hon. Member for Bromsgrove and Redditch (Mr. Miller) has said, the debate should have taken place at least five months ago.
We are now locking the stable door after the horse has gone. Redundancies under the plan are already taking place. Many of the measures are already in operation or are now being put into operation. Largely because of that, I believe that many hon. Members, even some with constituency interests in British Leyland, have not been able to put off their previous engagements to be here today because they probably feel that a debate at this time with the information available can have little impact upon the course of events in British Leyland.
I speak as an hon. Member with a special interest in the British Leyland corporate plan because in my constituency lies the Castle Bromwich plant of British Leyland Pressed Steel Fisher which was scheduled for almost complete closure under the plan. Only the tool room would survive after the phasing was complete. That plant has existed for almost 34 years and its closure will be an extremely severe blow to industry and employment in the north of Birmingham. Closure will create an industrial desert in that area. I have seen that happen before in some areas of my constituency when, for instance, GEC closed a number of its plants.
I am also critical of the distribution of the impact of the corporate plan because, in addition to the Pressed Steel Fisher plant, the major plant at Canley is to be closed. That means that the West Midlands will embrace substantially more than 50 per cent. of the total redundancies contemplated. It should be borne in mind that the West Midlands, which used to be a prosperous and resilient area, is no

longer so. Industries have disappeared. Redundancies have taken place. Quite recently, at Fort Dunlop, in my constituency, there were 1,200 redundancies. Old industries have tended to disappear or decline. There is a serious fear in the West Midlands for the future. That fear is not merely confined to the present recession.
That is why I am concerned about the distribution of the impact of this plan. I asked, when the plan was announced, to see the Secretary of State to discuss with him the general impact of the effect on my constituency and others. Though I persisted in my request, he declined to see me, on the basis that these were commercial decisions to be made by the company and that he as Secretary of State was not prepared to intervene in any way or to discuss these matters with me. I have been a Member of the House a long time and that was the first time that that had happened to me in such a context.
I appreciate that the Minister would not be prepared to intervene generally in commercial decisions of the company. I do not complain about that. The Labour Government adopted the same attitude towards British Leyland and other plants. However, I should have thought that, when a decision, either by a publicly owned company or even, indeed, by a company in the private sector, affected the economic geography of a particular area and the whole employment situation there, that would transcend the commercial decisions of a company and that it was a matter about which the Government should certainly consult Members and not just shelve it and say " This is a commercial decision for the company." That is one of my first criticisms of the plan.
For Pressed Steel Fisher the plan was to close everything apart from the tool room. There has been some reprieve. Originally it was intended that the paint shop, only recently constructed at a cost of about £25 million, should be dismantled. I was not quite clear what was to happen to it, or whether it was to be transported elsewhere. However, this appeared to the workers in the factory, and to myself, as a piece of nonsense. Fortunately, there seems to have been a reprieve. There seems to have been another minor reprieve—I do not know whether it is temporary—in that a part


of the press shop is being kept open in order to manufacture the bodies of the Jaguar. That would mean that rather more than 2,000 jobs out of 9,000 would survive. But the result would still be quite catastrophic. Already in this plant about 3,000 employees have been declared redundant or have left in the last year or 18 months. Morale is shocking. Let us face that fact, and let us not assume that there is all this so-called enthusiastic support for the plan, which previous speakers in the debate have suggested. It is not true. I have been to the plant. Many of the workers live in my constituency and that of my hon. Friend the Member for Birmingham, Stetchford (Mr. Davis). There is a grim feeling of foreboding.
When the scheme was first put forward, there was a certain amount of dazed disbelief among the workers. They did not think that it could happen. They thought that this was probably something intended to scare the workers into greater co-operation and fewer industrial disputes. That period has gone. Now there is a feeling " To heck with it all. We do not care. The sooner we get our redundancy pay and get out, the better." That is certainly nothing like the morale which is necessary to back the corporate plan. The situation may be somewhat better in Longbridge and some other areas, but from my knowledge it is not all that good there.
The corporate plan has been accepted by the workers—but what does that mean? What is put to them is this: " You either accept the corporate plan, with a slimmed work force—this is closed, that is closed, and there is this alteration in restrictive practices and all that—or there is no plan at all and the eventual closure of the factory. This is your job under the plan or you will have no job at all." In those circumstances, it is not surprising that the majority of workers voted for the plan. But we must face the fact that, regrettably, it was not with great enthusiasm. They have accepted the plan as their only alternative.
With the wage proposals, similarly, there is a good deal of resentment in the industry. I appreciate that the company says that the money is not available and that it must be competitive. However, we must bear in mind that the going rate

for pay increases seems to be about 20 per cent. The workers are getting 5 per cent. plus certain dubious additions which may or may not come into operation, depending upon productivity. That is the company's attitude. Even in the plants which are not affected by closure, there is a good deal of resentment about the offer. This does not augur well for the morale of the work force or for the complete co-operation which is necessary to put any plan into operation.
In his reference to the plan, Sir Michael Edwardes has referred to what he calls " winners and losers "—one closes down the losers and one keeps the winners. I think that that was his language. What are losers and what are winners? For instance, it is true that in Castle Brom-wich, up until some time ago, there was a loss of profitability—at any rate, on paper. What I am told by the work force is that this is, to no small extent, a matter of accountancy. When a component is produced in one factory and it is sent to another factory for completion, how does one calculate the economic cost and the economic price of such a component? That is the point. One can deal with things on paper so that a profit becomes a loss, and vice versa.
I am told by people in my constituency who work in the press and assembly shop that 45 hours of work were allocated for the assembly of a complete car, whether it be a Mini or a Jaguar. The 45 hours allocated means, in labour terms an allocation of £80 for the assembly of the whole car body, which seems to be to be ridiculously low. Labour costs are set on that basis. Therefore, I am not too impressed by talk about losers and winners, especially bearing in mind particular circumstances in a particular factory.
I went around the Pressed Steel Fisher factory quite recently. I was shown a good deal of the press machinery which has been there since the present factory was started 34 years ago, some of it even before then. This is bound to affect productivity and profitability. Therefore, the expression " winners and losers" is a term that relates to something which has not been examined sufficiently.
As far as my constituency is concerned, as the company has shown at any rate some flexibility, I am hoping that it will


reconsider some of its decisions with regard to these matters, especially in relation to the general effect in northern Birmingham.
I appreciate many of British Leyland management's difficulties. It is operating in exceedingly difficult circumstances. There is a world recession in the car industry, which I suppose neither British Leyland nor the Government, on their own, can do very much about. It has occurred in Europe and in America. But there are other factors. Europe and certain other countries, faced with the possibility of unemployment in their car industries, are exporting their unemployment to this country. The enormous 584 per cent. import penetration is not simply a problem for British Leyland. There has been a great increase in the foreign share of the market, even corresponding to a slight decline in British Leyland's share of the market. That is not due merely to the foreign car taking over the shortfall in British Leyland.
There has been discussion about import controls. There is a belief in this country, probably going back 50, 60 or 70 years, in the efficacy of free trade. We live in a different world today. Britain used to import its raw materials, and export manufactured goods to pay for them. At present we import almost as much in manufactured goods as we export. The situation has altered entirely. The practice of free competition based on free prices is out of date because there are so many non-tariff barriers which prevent British or other goods from entering a particular country. For example, Japan and certain European countries have hidden import controls. Therefore, this is a matter which must be taken into consideration, if this country is to survive as a manufacturer. I shall not suggest what form those controls should take, how selective they should be, or the basis of selectivity. It is a complex problem which must be worked out if we are to survive.
Similarly, we must consider the question of the rate of the British currency. The Minister still believes that this will be of assistance to British industry in the long run. I cannot agree with that. I was alarmed at the report that was published yesterday that showed a drastic decline in the rate of interest in the United States. That will almost certainly result in an inflow

of hot money into this country, probably an increase in the rate of sterling and in the price of British goods, and more difficulties for our exporters.
The Government can do something about those matters. They all affect the climate in which British Leyland operates, and they are matters to which Sir Michael Edwardes drew attention in his speech yesterday and in his report on the corporate plan. They must be considered in order to try to find a solution to the problem. I do not think that it can be solved by British Leyland alone.
I reiterate the remarks of my hon. Friend the Member for Nuneaton (Mr. Huckfield). There must be continuing support by the Government for British Leyland—if it needs it. Other countries support their industries in many different ways, either by concealed subsidies—sometimes, they are not even concealed, as my hon. Friend the Member for Nuneaton pointed out—or by other methods which facilitate their exports. There is a whole range of support in Japan, Europe and elsewhere, including provision of finance.
It has been asked what other international company has had as much support from the taxpayer as British Leyland. If the taxpayer had not supported investment in British Leyland to the extent that it has, the cost to the taxpayer would have been greater. If the consequences of closing down British Leyland are analysed—the effect on the balance of payments, the export industry and the home market of British Leyland, unemployment pay, the loss of income tax and revenue, and all the other factors connected with unemployment—the cost to the taxpayer would have been several times as great.
That must be borne in mind when we talk about support. We must not talk in terms of support to just any commercial concern. In this respect British Leyland is unique, and we must not forget it. It is the only British-based manufacturer of cars that is a currency earner. This matter must be considered not only on a British Leyland basis but in terms of cost to the nation. Therefore, I reiterate the advice that was given by my hon. Friend the Member for Nuneaton with regard to support by the Government. Although I have doubts about the plan, I hope that it will succeed and that it will bring British


Leyland back as a major manufacturer of cars.

Mr. John Patten: I am glad that the hon. Member for Birmingham, Erdington (Mr. Silverman) was able to get away from my constituency, because it has permitted us to hear his very well-informed speech about the present state of British Leyland. I am sorry that so few Labour Members who represent constituencies with strong BL interest have felt able to be present on a Friday. Hon. Members, such as my hon. Friends the Members for Bromsgrove and Red-ditch (Mr. Miller) and Birmingham, Northfield (Mr. Cadbury), with strong constituency interests would also have wished to be in their constituencies, but, like me, they thought it important to come to the House and take part in the debate.
The hon. Member for Nuneaton (Mr. Huckfield), who, unfortunately, is not in his place at the moment, has already been criticised as a wingeing Pom by Conservative Members. The hon. Member for Nuneaton has been truly " wet "—to use the term by its old-fashioned sense rather than in its new-found Conservative news-peak sense—to complain that to hold the debate today is somehow unfair and below the belt. I am pleased that the debate has been relegated to a Friday, because I think it is unfortunate that the House should be asked to debate the corporate plan. It is a good thing that we should be asked to debate the matter of financial assistance to a company. Equally, it is a good thing that we should be asked to debate the overall strategy of the economy as it relates to the motor car industry, but it is totally wrong for us to be asked to debate a corporate plan as such.
One of the great strengths of the Government has been that they have not been prepared to involve themselves in detailed negotiations about pay, productivity, industrial relations, and so on, within BL. The Government have not interfered with British Leyland on a day-today, month-to-month basis, and it is this, above all else, that has contributed to a new-found sense of realism within that hitherto strife-torn company.
Is it not extraordinary that, although we were told by many Labour Members and their trade union colleagues before

the general election that immediately the Tories got in there would be disaster for BL, that BL would be allowed to go down the plughole, that it would not be supported financially and that there would be industrial warfare within our greatest motor manufacturing company, exactly the opposite has happened? We have seen the greatest period of industrial peace within BL that the company has enjoyed since it was first put together in its present form. During the course of the last year, as my hon. Friends representing constituencies with BL interests know, we have seen a much greater record of industrial peace and productivity. So much for the threats and the implications that were made on no sound evidence by Opposition Members before the last general election.
Far from withdrawing support from BL, Her Majesty's Government have given a substantial amount of taxpayers' money in support of the company. On 20 December last year, my right hon. Friend announced support of £300 million to BL—a matter that we are debating today—and he has promised to consider another £130 million over the next two years—1981 to 1983—dependent on the performance of the company.
My right hon. Friends the Prime Minister and the Secretary of State, and Ministers on the Treasury Bench this morning, have lime and again supported BL and congratulated Sir Michael Edwardes and the work force on what they have done during this year which we were told would be disastrous for BL but which, relatively speaking, has turned out to be a more successful year for the company than Labour Members had predicted.
The hon. Member for Erdington, whose knowledge and great experience of the motor car industry I respect, said that the imposition of the Edwardes pay settlement on the work force would store up trouble for the future and would make the trade unions feel that they had not been adequately consulted and that their part in the planning process of BL would receive no attention from the management. That was also one theme of the speech by the hon. Member for Nuneaton.
In my constituency there are some 20,000 people working at Cowley, but a yawning gap has opened up between the trade union leadership and the


men on the shop floor. The trade union leadership says " Take us into the planning process. Pay attention to our demands for greater Government involvement, more import controls and the rest. Do not accept the Edwardes plan; do not accept the pay deal." But the men on the shop floor—the men who produce the motor cars, the men whose jobs and families depend on the success of BL—have listened to common sense and to the management. That new sense of realism which has come over the shop floor will contribute to the success of BL in the incomparably difficult years ahead.
I think that trade union leaders—there are many articulate, well-informed trade union leaders in my area who care passionately about the motor car industry—should stop and think about the complaints that they have made thus far. They should think for a second that they might be wrong. They should consider " Even if I do not believe I am wrong, is it not odd that my members—thousands of members of the Transport and General Workers Union in Oxford, thousands of members of the AUEW and hundreds of members of TASS—have decided that they do not wish to go down the path that the trade union leadership has suggested is right and that they prefer to let management get on and manage?" That should make intelligent and able trade union leaders—we are lucky to have many of them—pause for thought in the aftermath of the day of action.
I believe that it is a mistake for us this morning to worry about the corporate plan in its details. I am pleased that in the debate hon. Members on both sides of the House have not been fighting over the corporate plan like dogs over a bone saying " This plant should not be closed, but my plant should be kept going." We have largely avoided that this morning. To have politicians involving themselves in the management of the company will produce a dog's dinner, not a successful company.
We have only to consider the history of Government intervention in heavy and manufacturing industry over the past 30 or 40 years. Every time politicians have got their hands on plant and industrial location—this applies both to Labour and to Conservative Governments—there has been trouble, for example in the

steel industry. What a disaster it was to site the steel works at Ebbw Vale in 1936. Consider the trouble that caused. It has probably been a disaster to locate the Ravenscraig and Llanwern plants where they are—and a Conservative Government did that for reasons of intervention.
It is a great mistake for politicians to think that they have the right to tell the board of directors and management of a huge industrial combine such as BL how to run their affairs day after day, week after week. That is why I deplore the fact that in a sense we have had to debate the corporate plan. I would have welcomed a more general debate on the motor car industry within the framework of which one can set BL or, as we must from time to time, a debate on financial support for a company like BL in a specific sense. But to debate the overall corporate plan is a great mistake.
I wish to restrict my remarks to the area of international collaboration; I do not wish to talk about the corporate plan in detail. I believe that the future of the motor car industry in this country will be inexorably caught up with foreign collaboration. The Minister of State and other hon. Members have mentioned this important point. There is no doubt that BL in its present shape is too small a company in the world context to generate, first, the engineering resources and, secondly, the investment resources that it needs for the 1980s.
There is no doubt that a small to middle-sized volume car-producing company, such as BL, for historic reasons of foreign competition and misapplication o resources in the past is unable to produce the engineering skills and expertise that it needs. The only way for BL to survive in its present shape as a small to medium-sized volume car-producing firm is in cooperation with foreign firms, whether European, Japanese or North American.
Equally, we all know that, although the Government have most generously continued to support BL, BL will be unable to find from internally generated profits enough of the capital that it will need in the next four or five years. Therefore, it will have to look abroad not only for engineering and technical skills but for capital and capital investment. That is why I wholeheartedly welcome, as did the hon.


Member for Nuneaton, the collaboration that is beginning to take place between BL and Honda. I think that the hon. Gentleman saw, as I see, the Honda deal as extremely important in developing international links. I hope that the BL-Honda deal, which will begin the production of the BL Bounty at Cowley in 1981, is only foreshadowing increased international involvement by BL.
I think that this is an area in which the Government can involve themselves without intervening in the corporate affairs of BL. I think that the Government can do a great deal to encourage BL to involve itself in more international collaborative projects.
Much of the debate has focused properly on the short-term. The longer-term debate should involve international collaboration.

Mr. Ernie Ross: The hon. Member for Oxford (Mr. Pattern) said that it was a mistake to debate the corporate plan. That ties in with what Conservative Members believed prior to the election in May. That is made clear in the report by the Conservative Party policy group on nationalised industries. The report stressed that Conservatives intended to demand that each nationalised industry achieved a set rate of return on capital employed and that, if managers did not achieve that, they would be replaced. The report said that they would, however, be supported in whatever other action they had to take to achieve that return even if that meant that men were laid off. It said that uneconomic plants should be closed down and whole businesses sold off or liquidated.
The group made it clear that public corporations should not compete with private industry. That is shown in the Conservatives' attempt to denationalise the aerospace industry and the way in which they regard the shipbuilding industry.
The corporate plan suggests that Conservatives do not believe in an indigenous motor industry.
The document stated that there would be no direct Govenment control of prices or wages in nationalised industries. The only control would be the insistence on a rate of return on capital,

even if that involved the industries concerned raising prices, selling off surplus land or assets or closing uneconomic activities. We know where that has led us.
The document also states that the re turn on capital figures should be rigged so that an above average wage claim can be paid to the " vulnerable " industries. The document groups industries into categories—those which are vulnerable and which might demand Government support and others, which should be allowed to go to the wall. The document states that the trade unions could be taken on in the railway industry, British Ley land, the Civil Service and the steel industry. The Government's recent actions confirm the contents of that document.
There are no British Leyland facilities in my constituency, but I am sponsored by AUEW/TASS which organises over 7,000 qualified engineers and technicians in British Leyland. In April 1977 that organisation produced a booklet called " Leyland Cars—the Crisis of Design and Tooling Capacity." It was a response to growing concern among members about British Leyland. It became apparent quickly during the discussions on the report that the problems were common to the whole of the British motor industry.
According to the Society of Motor Manufacturers and Traders, imports continued at a high level last month. Imports accounted for 58·46 per cent. of the total sales compared with 57·51 per cent. a year ago. In the first four months imports were 57·55 per cent. against 54·87 per cent. a year ago.
Both my union and the one to which my hon. Friend the Member for Nuneaton (Mr. Huckfield) belongs suggest that one of the ways forward for the motor car industry is to introduce some form of import control to allow us to rebuild the British motor car industry.
My union has produced a booklet entitled "Import Controls Now". We set out some of the problems facing the industry and try to point the way forward. The booklet states:
 The figures produced by the SMMT clearly indicate where the growth in imports has come from in the last ten years. Despite spectacular growth from other areas and countries, in particular periods, the EEC countries have


consistently produced the majority of cars imported into Britain. For example imports from Japan rose rapidly between 1971 and 1975, increasing their market share from 1·0 per cent. to 90 per cent. But in 1975 an unofficial agreement was reached with the Japanese Automobile Manufacturers Association to limit sales and since then the Japanese market share has been steady around 10 per cent. Imports from the EEC countries have continued to rise and now two thirds of all imported cars come from the EEC.
In April, cars assembled outside the United Kingdom accounted for 51·33 per cent. of Ford's registrations, compared with 41·89 per cent. in April 1979. In the first four months Ford imported 53 per cent. of the cars that it sold, compared with 50·4 per cent. in 1979. Ford has a 32 per cent. share of the cars sold in this country. The figures represent a direct attack on our balance of payments. It is a problem that should be tackled.
In our report we set out some of the causes for the decline in sales. One cause is the bad publicity that the company consistently receives. A major factor is also the range of models that British Leyland has to offer. With few exceptions, British Leyland cars are older and were developed earlier than cars produced by its major competitors. That is one of the reasons why we do not object to the liaison between British Leyland and Honda, although we believe that there would be no real need for it if we concentrated investment in our own industry.
British Leyland is unable to offer a modern range of models because it has invested less than its major competitors. Our booklet contains a table setting out investment as a proportion of sales. We give figures for Volkswagen, Renault and BL. Although there are fluctuations from year to year, the overall under-in-vestment in British Leyland is clear. The figures also show that the biggest gap between BL and its competitors was in the early 1970s when it was privately owned. The figures bear out some of the conclusions in the Ryder report of 1975. It stated:
 In the automotive industry most manufacturing equipment is replaced after 8–12 years. In BL more than half the machines and equipment are over 15 years old.
The money which should have been invested in new models and new equipment was instead paid to the shareholders. The report stated:

 Despite the low level of profits BL has over the period distributed nearly all of them as dividends. In our view, this policy is clearly wrong.
That view is shared by many workers in BL.
The mistaken policy of linking investment to industrial relations meant that, even after the State took a majority shareholding, the rate of investment was low. Many of British Leyland's current problems stem from the fact that there was an inadequate level of investment when the company was in private hands. Even if British Leyland had not been weak, imports from multinational companies would have increased dramatically at the end of the 1970s. Multinational corporations decided to import cars into Britain, rather than to make them here. Detailed figures are available only from 1976. However, they show a trend towards imports and against production in this country.
Conservative Members and others made promises about the benefits that would accrue if we joined the Common Market. They said that our accession to that body would help the British motor car industry. In 1975, the Society of Motor Manufacturers and Traders said:
 The EEC offers a vastly increased home market for British industry as a whole, allowing economics of larger scale production.
Events have demonstrated that American and Western European companies have chosen to maximise economies of scale in their French and West German plants. The United Kingdom has become an easily accessible home market. The import of finished cars has had a knock-on effect. The sharp decline of our motor car industry has greatly damaged the supply industries. In its report, the tyre sector working party stated:
 The decline of Britain's vehicle industry has wide implications for component manufacture in the United Kingdom... BL alone is estimated to provide work for 250,000 people in the component industries in addition to directly employing 165,000.
A combination of reduced United Kingdom car production and other internal difficulties meant that the United Kingdom tyre industry made five million fewer tyres in 1978 than in 1970.
Other component industries may not have contracted as severely as the tyre industry. However, they have felt the impact of the import of finished products.


The Secretary of State suggested that Lucas might wish to buy some shares in British Aorospace. That company has expanded by buying 50 per cent. of the shares in the French company, Ducellier, in July 1979. Associated Engineering bought the leading French maker of plane bearings Société Industrielle des Cous-sinets, in December of last year. The knock-on effects harm not only British Leyland but the component industry.
The decline of the component industry has also affected the machine tool and chemical industries. It has had an adverse effect on the steel industry, and has contributed to its decline. British Steel used to be a major supplier of British Leyland. The decline must have contributed to the loss of 52,000 jobs in that industry.

Mr. Adam Butler: The hon. Gentleman has spoken about the effect on the components industry of low production at British Leyland. Perhaps he would care to reflect on the figure that I gave earlier. I pointed out that, thanks to the strike by the CSEU last autumn—I understand that the hon. Gentleman's union is a member of the CSEU—59,000 Leyland vehicles were lost. That had a very serious effect on the component industry.

Mr. Ross: Obviously, any dispute will have an effect on the industry's ability to supply a product. That does not alter the fact that strikes and the loss of man hours do not have the same impact as a lack of investment. Some of the disputes have concerned levels of manning and track times. Those problems are linked with under-investment. Workers have sought to protect their wages. British Leyland has lost profits as a result of its inability to compete with foreign imports.
We shall continue to argue in favour of some form of import control, especially for British Leyland. It is essential to reduce imports and to increase production in the United Kingdom, if the motor industry and those industries that depend on it are not to go into further decline. Without direct State intervention and import controls, it is difficult to see how that can be done. Multinational companies will continue to import cars and kits into the United Kingdom, and to have those kits assembled here. The rebuilding of British Leyland's model range will be slowed. British Leyland's declining market

share endangers its programme for new models in two ways. First, it reduces its income and makes the company more dependent on a hostile Government for the massive investment that it needs. Secondly, if the decline continues, British Leyland will begin to lose one of its most valuable assets, namely, its extensive dealer network. Dealers will either go bankrupt or move to other manufacturers.
If British Leyland's decline in sales is allowed to continue, those two factors will combine to destroy the programme of investment that is essential for the company's survival. Import controls are therefore essential. They will ensure a stable and growing domestic market for British Leyland. It will enable the company to generate the funds that it needs to revitalise its model range.
My union has prepared many reports and has appeared before a Select Committee. We have suggested a way forward and an alternative for British Leyland. We have pointed out that it is no accident that the British Leyland Honda deal was followed almost immediately by record import penetration from the Common Market countries. That highlights the crucial weakness in the British motor industry. It is the inevitable consequence of a short-sighted policy that has been pursued by the company, the NEB and the Department of Industry.
There are three major weaknesses in British Leyland. First, the British motor car industry is increasingly reliant on imported technology. That adversely affects employment levels, training and the provision of skilled engineers and designers. Secondly, the import of technology—whether in the form of design or of finished products—leads to a drain on Britain's balance of payments. One would expect Conservative Members to be concerned about that. It puts a constraint on our development as a technologically advanced industrial nation. It seriously threatens future skills, because there will be fewer and fewer apprentices to continue the skills that are generated and required for the success of that industry. Thirdly, one must consider commercial independence. Commercial secrecy and future model plans are linked with competitiveness. It therefore cannot be healthy if the only indigenous British


motor car industry has to rely on machine tools and design companies—as a result of the first two weaknesses—that have direct links with their multinational competitors.
The proposed reductions in model volumes, together with an investment programme that is substantially smaller than those of our competitors, will not achieve one of the major planks in British Leyland's plans—namely, competitiveness irrespective of the manning levels that are agreed. Inevitably, British Leyland cars will be unable to compete successfully against other major producers. That will lead to further contraction and the eventual extinction first of British Leyland, and then of the British motor car industry. The multinational corporations will then retreat to Europe or areas of unorganised labour where they can produce cars even more cheaply. I believe that both Sir Michael Edwardes and the Tory Government understand and support that idea. They appear to be trying to ensure that that occurs with a minimum of fuss and disruption, and they are trying to lay the blame for the demise of British Leyland anywhere but themselves.

Mr. John Patten: Is the hon. Member really suggesting that the present Government wish to see British Leyland collapse? If so, can he explain why the Government put £300 million into British Leyland last December?

Mr. Ross: I am glad that the hon. Member intervened then because I was just about to give a clear example of the way in which Tory Members are collaborating with Sir Michael in bringing about the rundown of British Leyland.

Mr. John Patten: Rubbish.

Mr. Ross: An example is the decision to cancel the new aluminium foundry which was designed to meet 60 per cent, of British Leyland's requirements for aluminium castings, particularly for cylinder blocks. Perhaps Conservative Members are not engineers and they may not understand the significance of what I am saying. When one wishes to sell a car, one must consider two component parts—design and capability. The design is very much up to the market. It depends on what people want and the shape of car that they wish to drive. The capability

is the " tiger under the bonnet". That depends on the engine that is put into the car. It is crucial that we should manufacture and design our own engines so that the technology and specifications of those engines are not readily available to our major competitors, and so that we can ensure that our cars will be sold on the market.
One of the requirements for the engine is the cylinder block. The foundry was designed to meet 60 per cent. of the BL requirements for aluminium castings and the cancellation of this project leaves British Leyland entirely at the mercy of our European competitors. Originally it was the intention that these castings would be bought rough from Fiat, the company which, because of its growing monopoly in this area, would determine the terms, financial and otherwise, on which we obtained the castings. Looking at the way in which the corporate plan is structured, and knowing full well the Conservative views. I believe that it is likely that these castings will be bought as finished products. It makes much more sense to the Government not to employ skilled tool-makers to finish the product. As a result, our balance of payments will suffer and consequently there will be a further loss of skilled jobs in British Leyland.
The original investment of £24 million was described initially by Sir Michael Edwardes as absolutely essential for the survival of British Leyland cars. Yet the decision not to proceed with the foundry has not raised any comment from Conservative Members.
One of the other areas which concerns us is that of salaries paid in the industry. If we are to have a viable and healthy industry, clearly we must ensure that we attract the right kind of skilled workers. This debate about the corporate plan illustrates a critical weakness in the strategy pursued to regenerate the British motor industry. If the nation fails to reward workers in the nationalised industries, the nation will suffer. We cannot expect high productivity from low-paid workers. If the company fails to reward adequately those qualified technicians and engineers we shall lose them and we shall lose their ability to design and develop new products.
In 1978 France produced a report which highlighted the acute shortage of design staff. British Leyland Cars' staffing establishment in 1978 was 148 for design engineers. However, at that time only 90 designers were employed. One of the reasons why BL could not attract designers was the low rates of pay operating in the industry. If we continue to fail to reward these people we shall shortly become a nation of assemblers, increasingly relying on imported technology. Skills and jobs will go, and British engineering, which once led the world, and could do so again, will become an also-ran. One of the missing elements in this plan is the commitment to reward workers fairly.
I welcome this debate, although I would have preferred it to take place when more Members were present. I hope that we shall continue to have debates about British Leyland and its corporate plan. My union does not believe that the corporate plan is the way forward. It is our responsibility as elected representatives to explain to the electorate that if we lose British Leyland we can say goodbye to the whole British motor industry. Without the existence of a major British manufacturer the constraint that is placed upon the American and French multinational corporations, such as Ford, Vauxhall and Peugeot, to retain a substantial manufacturing capacity in Britain, will disappear. That rationalisation will be considerably accelerated without British Leyland, and this will lead to the eventual demise of an indigenous British motor car industry.
This debate has been crucial because it is vital that we discuss the future of the British motor car industry. I hope that we shall establish within the industry working practices which will ensure that we have a healthy and viable motor industry in the future. I only wish that Conservative Members understood that some of the efforts made by workers and others to put forward plans, as alternatives to those of the employers, are reasonable and responsible moves. It does not help this debate that one of the managers of British Leyland should accuse the Transport and General Workers Union of making a deliberate and concerted effort to stop the company from imposing its new pay and work practice package. That is not the kind

of language that is required in British Leyland. Instead a commitment is required to expand the company—an expansion in both volume production and the range of models in order to ensure that we have a healthy and viable indigenous British motor car industry in the 1980s.

Mr. Jocelyn Cadbury: At the heart of this debate is the question whether a British-owned indigenous motor car industry is to survive. I was interested in the point raised by the hon. Member for Nuneaton (Mr. Huckfield). He suggested that much more Government money should be made available to British Leyland. How much is the hon. Gentleman suggesting—an infinite supply? However, we must be clear that, without the £300 million assistance for 1980–81 and the further £130 million for 1981–83, the company will not be able to carry out its investment plan for new models and plant. If that plan is not carried out, BL will effectively be renouncing the hope of remaining a volume car producer. It will almost cease to exist as a viable manufacturing unit. We should therefore consider what the country will lose.
I wish first to emphasise the importance of BL to the British economy and the West Midlands. I also wish to mention what the company has achieved in the past year, and assess the chances of success for the future plan.
BL is unique among domestic car manufacturers in that it buys almost exclusively British components. It spends £2,000 million a year among 7,000 United Kingdom businesses. A significant proportion of sales by motor component manufacturers such as Lucas, GKN and Rubery Owen, are dependent on Leyland. Diverse industries such as glass, rubber and carpets are strongly linked to the fortunes of BL. I agree with the hon. Member for Birmingham, Erdington (Mr. Silverman) that, when British Leyland loses its market share, jobs are lost at companies such as Dunlop and Triplex in Birmingham. BL employs about 9 per cent. of the working population of Birmingham.
The second aspect of British Leyland's strategic importance is its contribution to the balance of payments. In 1979 the


company earned a trade surplus of £700 million. We should compare British Leyland's performance with that of other domestic motor car companies. For example, the Ford company's effect on the balance of payments is negative. It imports more than it exports.
Despite many external factors, 1979 was a turning point for BL. Those external factors have tended to overshadow Sir Michael Edwardes' achievements, particularly over industrial relations. Much has been achieved. A tremendous improvement has been made in communications by BL management to its employees. The favourable outcome of the ballot last year on the company's recovery plan, in which 87 per cent. of those participating voted in favour, was due to the excellent communications and presentation of the plan to the work force. Strenuous efforts are being made to brief junior management and use it as a vehicle of communication to the work force. Previous generations of British Leyland management did not do that. It is a major step forward and the key to raising morale among the work force. Sir Michael Edwardes is setting a good example which the remainder of British industry should emulate.
It took many months to get agreement on the annual wage deal and the introduction of new working practices.

Mr. Les Huckfield: There was no agreement. That wage packet and the 92-page document was imposed on the work force. I hope that the hon. Gentleman will not try to mislead the House into believing that the trade unions agreed to the proposal.

Mr. Cadbury: The majority of the work force accepted it. The fact that the work force returned to work and only sporadic strikes occurred, against the advice of union officials, shows that the proposal was accepted. It is not easy to get people to change habits and customs built up over many years. To have got this far is a major achievement. We should not expect too much too quickly.

Mr. Huckfield: I do not believe that the hon. Gentleman understands what he is talking about. The 5 per cent. has been put into pay packets, but the imposition of the 92-page document and the

changes in working practices have not started. The hon. Gentleman cannot claim that putting an extra 5 per cent. in the wage packet is a great achievement.

Mr. Cadbury: Many of the problems surrounding working practices are being tackled. It was never intended that these proposals would be introduced overnight. The new working practices are being introduced.
Against that background of change, during 1979 we saw a 52 per cent. reduction over 1978 in the number of days lost by strikes. That is a remarkable achievement. Certainly at Longbridge there is a new mood of realism. One should not confuse that with enthusiasm, as the hon. Member for Erdington pointed out. However, the new realism was demonstrated on Wednesday during the so-called day of action, when Longbridge continued to work normally and no production was lost.
A second major achievement last year and during the first part of this year was the introduction of the new model programme. Revised models of the Mini, the Allegro and the Jaguar-Daimler range have been launched, as well as the convertible TR7 and the Land-Rover V8, and the new Morris is to be launched in July to replace the Marina. Perhaps the most critical feature of the new programme—the Metro—is on target for launch in October. I had the opportunity to visit the new plant with other hon. Members some time ago. I was tremendously impressed to see what will be the most modern car assembly plant in Europe. About 50 per cent. of all the robot equipment in this country is inside that plant in my constituency.
Thirdly, a further major achievement was the signing of the deal with Honda. Critics say that this deal will lead to a Japanese invasion and loss of business for British manufacturers. However, the Honda bounty will generate new business for British Leyland. Without that deal there would have been no replacement for the Triumph range. BL does not at present have the design and engineering capability to develop a new car of that type by itself. Without that deal it would have to withdraw from that part of the market.
We must judge BL's performance over the past year against the background of


the extremely hostile environment in which it had to operate. It must have been a source of extreme frustration for the company that it lost far more production from external disputes last year than from internal troubles. The lorry drivers' strike and the engineering strike did terrible damage to the company. Average weekly production fell from a consistent 16,000 cars a year in May and June last year to 7,000 in September. The management could not control those external disputes.
A further area beyond the company's control is the high value of sterling. As has been said, the United Kingdom is now a highly profitable market for importers. For example, if the Japanese made a 10 per cent, return on the import of cars last year, they are now making the equivalent of 40 per cent. The converse of that is that BL's exports are that much less profitable, and that is particularly important in the American market, where so many of the luxury and sports car models are sold.
There is also the whole problem of the world recession. We have only to look to America to see that there are terrible problems for motor companies in the United States where 200,000 out of 758,000 hourly paid employees are laid off. Of course, we know the problems facing Chrysler.
In those circumstances, it is inevitable that competition will become more intense. The Japanese are experiencing increased competition in the United States and they will be looking to Europe to ensure continued expansion of their already immensely powerful motor industry.
I am totally opposed to general import controls, which I gather are advocated by some Labour Members, though it is not clear whether all Labour Members agree on that subject. The hon. Member for Nuneaton must make it clear whether in putting forward that policy he is advocating that we should tear up almost every free trade agreement that we have signed with the Common Market and the rest of the world.
I agree with my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) that there are certain areas in which the United Kingdom is suffering from unfair imports. My hon. Friend mentioned Spain and Eastern Europe. If we send cars to Spain we have to pay a 63 per cent. tariff, whereas cars sent here

from Spain bear only a 4 per cent. tariff. I understand that that will be rectified if the negotiations for Spain to join the Common Market are successful, but the Government should take account of that situation.
Last year, about 40,000 vehicles were imported from Eastern Europe, representing 2·3 per cent. of our market. They come in at about 25 per cent below the price of the equivalent Western products. Although the figures are comparatively small, we should beware, because the Japanese started their invasion of this country at the bottom of the market and built on to the niche that they established. I should like the Government to take note of what could be a further long-term threat.

Mr. Ernie Ross: I find it difficult to follow the hon. Gentleman's claim that imports from Comecon are a threat. Like him, I obtained from the Library the motor industry's figures of the import penetration of new cars into the United Kingdom. The hon. Gentleman suggests that the penetration of 1·78 per cent. by Comecon countries is a threat, because that is how the Japanese got started.
However, will the hon. Gentleman reflect on the fact that the industry's figure for Comecon penetration between December 1978 and December 1979 was 2·05 per cent. and the fact that it was reduced to 1·78 per cent. between April 1979 and April 1980 hardly supports the hon. Gentleman's claims.

Mr. Cadbury: The figure that I have for last year is 2·3 per cent., but the hon. Gentleman's intervention does not detract from my point that the Comecon vehicles are sold at well below the price of equivalent Western vehicles.
I agree with my hon. Friend the Member for Oxford (Mr. Patten) that it is ridiculous that we should consider debating details of a corporate plan which is the business of the company's management. However, I should like to say something about the likelihood of the plan's succeeding.
A great deal of momentum has been built up under Sir Michael Edwardes' dynamic leadership and there is a good chance of success if that momentum is kept up over the next three years. But


success depends on certain aspects of the plan being carried out.
First, the new models that are planned in the next three years must be launched on time. Secondly, there must be further collaborative deals over the next few years. British Leyland is only the fifteenth largest company in the world motor car manufacturing league. It is significant that Renault, Volvo and Peugeot share a joint engine plant at Douvrin in France. Collaboration is the only way to obtain economies of scale and the only way that British Leyland can overcome the serious shortage of engineering capability, which cannot be made up in time. There is no alternative to collaboration with other countries.
Thirdly, BL must continue to raise its productivity. I do not believe that it is over-optimistic to expect that at least European levels of productivity can be achieved as the new equipment is introduced. Fourthly, the trend towards better industrial relations must be maintained. The new mood of realism needs to be converted into one of enthusiasm. There is still a long way to go in that respect, but I believe that the tremendous efforts that are being made to improve communications will eventually succeed in rebuilding confidence among employees in their management.
A fifth element, which is crucial, is that the company must continue to improve the quality of its vehicles. That is the only way in which the public will begin to regain confidence in the products.
If all those objectives are achieved, British Leyland will begin to earn a reputation as a reliable producer of good quality vehicles and the car dealers will regain confidence in the company. That is crucial, because as long as the dealers are deserting to other companies, the market share of BL will decline.
I am optimistic enough to believe that those objectives can be achieved and that is why I support the Government's decision to put more public money into the company. To fail to support Leyland over the next two critical years would be to condemn to death Britain's only indigenous car company.
I should like to add that the problems that British Leyland is trying to overcome

are the problems of British industry as a whole. That is why Sir Michael Edwardes' achievement is so important. He is showing the rest of British management that British industry can be revived and that one can win in this country.

Mr. Terry Davis: Unlike the hon. Member for Oxford (Mr. Patten), I welcome the opportunity afforded by this debate.
I was very surprised to hear the hon. Gentleman say that it was totally wrong for the House to be asked to debate the corporate plan for British Leyland for 1980. It is not a matter of interfering in the day-to-day or month-to-month decisions of the management of British Leyland. It is a matter of accountability for taxpayers' money. I am amazed that any hon. Member should say that it is not the job of Parliament to hold the management of a nationalised industry accountable for the money which it has had for its investment programme and to monitor its achievements.
It is wrong to describe an annual debate on the performance of British Leyland as interfering in the day-to-day decisions of the management of British Leyland.

Mr. John Patten: The hon. Member accurately reported to the House the first of my words, but I went on to say that I would have welcomed a general debate about the financial framework of British Leyland or about the framework of the economy as it affected the motor industry.

Mr. Davis: There is no difference between us about what the hon. Gentleman said. My point that it is right for hon. Members to debate the performance of a nationalised industry and not simply the financial framework of the industry or the motor industry in the wider sense as opposed to the nationalised company which we are discussing today.
I am interested in this debate for two reasons—first, because I worked in the motor industry for several years, and I worked for British Leyland for five years from 1974 to 1979. Secondly, I am interested because a large number of my constituents work for British Leyland and its suppliers, and many more of my constituents used to work there but have either retired or lost their jobs through


the redundancies which have occurred and which are now occurring.
Since I intend to express some criticism of the document that is before the House, I hope that I shall not be accused of wanting British Leyland to fail. On the contrary, it is because I am so anxious for British Leyland to succeed that I am critical of the document and the plan that it represents.
For reasons that I have explained, I approached the document with great interest, and I was disappointed with its contents. I am appalled that the House of Commons should be expected to debate the future of British Leyland—in effect, the future of the British motor industry—on the basis of such inadequate information. Bluntly, I regard it as a pathetic document that has been presented to the House of Commons and that we are asked to take note of today.
I should like to comment first on the section dealing with the performance of British Leyland in 1979. I have never seen such a mish-mash of figures. In some places, we are given figures for the first half of 1979. Elsewhere, we are given figures for January to September 1979. In one place, we are given figures for January to November 1979. To some extent, that is understandable because the document was published in December at the time of the decision by the Secretary of State to continue the financial support which had been promised by the Labour Government. It was entirely proper in the circumstances for the Secretary of State to publish the latest information available at that time, although it is a little peculiar to set out the information in tables which compare six months, nine months or eleven months of 1979 with the complete years of 1977 and 1978.
Even the present Secretary of State must appreciate that it is not possible simply to extend the figures for part of a year to get any idea of the performance of British Leyland in a full year, bearing in mind that we are dealing with an industry which is seasonal in sales and production. In any event, the figures were published five months ago. In the meantime, the full figures for 1979 must have become available. I cannot understand why the Secretary of State has failed to provide Parliament with the

figures for the full year of 1979.
My hon. Friend the Member for Nuneaton (Mr. Huckfield) raised this matter, and the Minister of State intervened to point out that the annual accounts were now available. But that is not good enough, for two reasons. First, those accounts are not available in the Vote Office—at least, they were not available this morning. A copy of the annual accounts is not even available in the Library. Hon. Members can get copies for themselves, of course, but the Secretary of State has an obligation to provide information to the House, and he has failed to meet that obligation.
Secondly, it is not good enough to refer hon. Members to the annual accounts, because there is a world of difference between a performance review and the annual accounts. There is much more information available for part of the year 1979 in what is called the performance review, but that sort of information is not available in the annual accounts. Therefore, it is right for hon. Members to complain that the Secretary of State has neglected to supply the proper information to bring hon. Members up to date. When the Under-Secretary of State replies, I hope that he will simply apologise to the House instead of wriggling in the way that the Minister of State did when he intervened in the speech of my hon. Friend the Member for Nuneaton.

Mr. Les Huckfield: I agree with all that my hon. Friend has said because, during the week, I telephoned the office of the Minister of State to ask what information his Department intended to furnish to the House. Considering that I had specifically requested more information because I thought that the statement of December 1979 was not enough, what my hon. Friend says is right. It is an insult to the House of Commons if it is to be provided with so little information.

Mr. Davis: I simply hope that the Minister will apologise for the failure of his Department and the Secretary of State to provide the information to us. I shall respect him much more for that than if he tries to wriggle, as the Minister of State did.
Then we have a peculiar insistence on comparing performance in 1979 or part of 1979 with performance in previous years. I am not sure why the Secretary of State


has decided to use only two previous years, 1977 and 1978, unless it is intended to compare the performance of British Leyland under Sir Michael Edwardes with its performance during the year before he was appointed. Leaving that on one side, surely the best way to judge the performance of management is to compare what it has achieved against what it undertook to achieve.
Nowhere in the document can I find any comparison of actual performance with budget or target except where we are told that United Kingdom car sales were slightly above budget for the first half year but probably below budget for the year as a whole. We are not given any clear information about the extent of the difference, nor told the extent to which sales exceeded budget for the first half of 1979 thanks to the market being higher than forecast as distinct from sales effort.
I should also like to point out that there is an apparent inconsistency between the information in paragraph 15 and the statement in paragraph 11 that sales revenue suffered from lower than planned sales volume, unless paragraph 11 is intended to refer to the combined sales targets and actual sales volumes for BL Cars and Leyland Vehicles, in which case the sales performance of Leyland Vehicles must have been significantly worse than the performance of BL cars.
I come to my next point about this inadequate document. In some places, we are given separate figures for BL Cars and Leyland Vehicles. In other places, we are given aggregate figures for BL Cars and Leyland Vehicles together and presumably also including information for BL Components and SP Industries. I am forced to the conclusion that the information has been presented to Parliament in a way that is designed to prevent hon. Members from forming a considered judgment about the performance of the company and its management.
I take one specific example of what I mean. We are told in the document that the average productivity for cars during the first nine months of 1979 was 5.2 cars per man year compared with 5·8 during the first six months of 1979 and 5.7 in 1978.
Incidentally, the hon. Member for Oxford said that productivity had improved

during the last 12 months. I do not know where he got the figure from. It is not contained in the document before the House.
Everyone knows that, in any case, these figures are affected by the mix between Austin-Morris and Jaguar-Rover-Triumph vehicles. In 1978, Austin-Morris produced nearly twice as many vehicles per man as Jaguar-Rover-Triumph. That is no criticism of Jaguar-Rover-Triumph; it takes more labour to produce the more expensive and specialised vehicles. At the same time, it is obvious that if BL Cars made proportionately more JRT vehicles than Austin-Morris vehicles in 1979 than in 1978, productivity will appear to have declined when, in fact, it has not declined. We do not know because the information is not given. It has not been presented to us in the document before the House. If Sir Michael Edwardes did not give this sort of detailed information to the Secretary of State, the right hon. Gentleman should have asked for it.
This lack of information is even more striking when we look at the BL 1980 corporate plan. I understand the need for some figures in the 1980 plan to be regarded as confidential, although I suspect that BL's competitors have much more information than we have been given about what BL is trying to do.
Productivity is nearly always regarded as the key indicator. Why cannot the Secretary of State tell us BL's productivity target for 1980? No such figure appears to be contained in the document before us. We know what the target was in 1979. Again, that is not in the document. It should be in it, but it is not. The productivity target for 1979 was 6.0 cars per man year. For 1978 the target was 6.4 cars per man year. In that year the performance was about 10 per cent. lower than the target, so Sir Michael Edwardes set a lower target for 1979. He missed that by about 10 per cent. as well. And I am not surprised because, in my view, the approach of Sir Michael Edwardes and that of the BL board is wrong.
There are two ways of improving productivity. The first is the one that has been chosen by BL—namely, to keep the same level of production and to reduce the number of employees. The second is to keep the number of employees the same and to increase production. That means, that it is necessary to sell more vehicles.


That is BL's real problem. It is not a production problem. The company has a sales problem. When this has been raised in the House, we have been told by the Secretary of State that there are waiting lists for some vehicles. That is true as far as it goes, but the waiting lists are usually for specialist vehicles, and what matters in this context is the volume car business. For this purpose I am including the Rover saloon in the phrase " volume car ".
My most serious criticism of the plan is that it is a plan for contraction whereas we need a plan for expansion. We have already been told that the plan has been accepted by those who work at BL. The hon. Members for Bromsgrove and Red-ditch (Mr. Miller) and Oxford told us that the work force has accepted the plan against the advice of trade union leaders. If the English language means anything, those statements were rubbish.
The engineering union, ASTMS and other unions accepted the corporate plan. It was not accepted by some other individual unions, but it was endorsed by the Confederation of Shipbuilding and Engineering Unions, which recommended to those who work for BL that they would vote for the plan. It is true that some individual unions continue to oppose it, but if words such as " trade union leaders " mean anything it was the trade union leaders who urged employees to vote for the plan.
I am not surprised that employees voted for it or that trade union leaders suggested that they should do so. They had no alternative. They were given two options. They were described by the Minister today—namely, " Vote for the plan or collapse." In effect, there was no choice. It was a matter of accepting death or hoping for survival. That was the " choice" presented to the work force, and it was not an attractive one.
There are problems in arguing that BL should set out to increase its sales. There are problems with the model range. The, company needs to introduce new models. That will take time. In the meantime, BL salesmen are trying to sell the company's vehicles against a difficult background. That does not mean that we should sit back and accept that nothing can be done. We must not allow British Leyland salesmen to use the model range as an excuse for poor performance. To be

fair to them, it is not their fault only. They are selling in an increasingly difficult market.
The best part of the corporate plan is the introduction, particularly paragraph 3, which sets out the reasons for the crisis that hit British Leyland last year. It is clear that the crisis had nothing to do with strikes. It is clear that it had nothing to do with trade unions or with the quality of the cars.
Three factors are listed in the introduction to explain the crisis at British Leyland last year. The first is the substantially lower forecast of world-wide demand for vehicles following the 1979 oil crisis. The second is the strengthening of sterling affecting both overseas revenue and British Leyland's competitiveness against imports. The third is a drop in BL's United Kingdom market share for both cars and trucks due largely to the increased competitiveness of imports.
Those are the real reasons for the crisis which hit British Leyland last year. It is obvious that the Government cannot do anything about the first factor—the size of the world market—but they can do something about the value of the pound and the level of imports.
The tendency is for Conservative Members and Ministers to suggest that they have done everything necessary by agreeing to finance the British Leyland investment programme. Their theme is " We have given them the money and it is now up to management and the work force to make British Leyland succeed." That view came across clearly in an intervention by the hon. Member for Knutsford (Mr. Bruce-Gardyne), who referred to the amount of support given by other Governments to their national motor industries. He sought to suggest to my hon. Friend the Member for Nuneaton that the amount of financial support given by those other Governments was less than the support given by the previous Labour Government and by this Government.
That intervention was significant because it is clear that some Conservative Members, and the Government, think in terms of financial support only. They believe that they have done everything that needs to be done by making the money available for the investment programme. Foreign Governments do not see support simply as a matter of money.


They support their own motor industries in other ways.
It takes time as well as money to introduce new models. Without time, it can be a waste of money to finance the investment programme because by the time that programme bears fruit the market, unless we are careful, may have disappeared.
The Government can take action to help in the retention of British Leyland's market. We have heard about interest rates. The hon. Member for Bromsgrove and Redditch said that the Government were tackling the problem of high interest rates with resolution. I hope that we never see the Government being flabby. Everybody deplores the fact that the exchange rate is so high and the Minister referred to the petro-pound. It is within the power of the Government to take action to stabilise the exchange rate or, if necessary, reduce it to ensure that our exports remain competitive and that imports do not remain as cheap as they are now.

Mr. Ernie Ross: Would my hon. Friend care to comment on the absence from the statements made by Conservative Members of any reference to the rate of inflation which is affecting British Leyland's export market and the effect of Government policy on the rate of inflation?

Mr. Davis: My hon. Friend is tempting me to stray much further than I wish to go in this debate. Of course, the inflation rate is a major factor. I believe that it featured prominently in the remarks of Sir Michael Edwardes yesterday. However, from this document it can be seen that the major factors are the exchange rate and the competitiveness of imports. It is not simply a matter of price; there are other factors as well. It will take time for British Leyland to be able to compete. It is not enough simply to pay out the money for the investment programme, only to find that when it bears fruit and the new models are available the market has disappeared. The Government have an obligation to protect taxpayers' money by trying to protect the market.
I agree with the comments of my hon. Friends. All of them have referred to the problem of imports and to the need to control them. One of the points that has

not been brought out by any speaker is that a significant cause of increased imports of foreign vehicles is not the Japanese, the Spanish or the Comecon countries, or indeed, the motor industries of other Common Market countries. A major cause of increased imports lies in the decision of three motor manufacturers, Ford, Vauxhall and Talbot, to import more vehicles than they previously imported. There has been a switch in their sourcing policy. Their combined market share has remained relatively stable. What has changed is that the vehicles that they sell here under those brand names are no longer manufactured almost entirely in this country and an increasing proportion are manufactured in their factories in other European countries.
It is time for the Government to take whatever measures are open to them to reduce the import share of the British car market. I have never been an enthusiastic pro-Marketeer, but I understand the problems of being in the EEC and trying to do something about the import problem.

Mr. Michael Brown: The hon. Gentleman has rightly drawn attention to the regrettable step which has been taken by a number of motor car companies, such as Ford, and the fact that they use a lot of labour and materials to assemble cars in other parts of Europe. However, would he care to speculate on some of the reasons that have driven them to take those regrettable decisions?

Mr. Davis: I think that the reason that they have taken those decisions lies in the search for increased profits. It is more profitable to manufacture cars if one is in the centre of the Common Market than-if one is on the periphery.

Mr. Brown: What about industrial relations?

Mr. Davis: I am not avoiding any of these subjects. If the hon. Gentleman had been present throughout our debate, he might have heard several references to industrial relations. As his hon. Friends have pointed out more than once, there has been a significant improvement in industrial relations in British Leyland in recent years. I am not saying that the improvement is good enough; but the


responsibility for improving industrial relations rests with management as well as trade unions.
It is true that at present any investment decision about where to locate one's manufacturing facility would be greatly influenced not only by the exchange rate as it is today but by the exchange rate as it is forecast for the future. The future, for the next few years at least, will mean that we shall continue to have a high exchange rate as a result of North Sea oil. That is the problem.
This country has changed from being a country which lived, as my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) said, by exporting its manufactured goods and importing its raw materials into a country which imports manufactured goods and exports one raw material—North Sea oil. That does not provide employment for my constituents or those of my hon. Friends who represent West Midlands seats. That is one reason why I object to the present policies.
I return to my most important criticism of the Government. They must not just talk about the problem of imports, or just regret the increase in imports; they must do something about it.

The Under-Secretary of State for Industry (Mr. Michael Marshall): This has been an interesting debate, and there have been important contributions from both sides of the House. But some of the argument about the nature of the corporate plan has tended to overlook the fact that our debate today is on a motion to take note of the statement made by my right hon. Friend the Secretary of State on 20 December 1979, and, in effect, to take note of the Government's responsibility for British Leyland's 1980 corporate plan. That is an important point. Clearly, from the Government's standpoint, it is relevant to discuss those actions related to the corporate plan for which we have responsibility and on which it is sensible to give our view.
There is a wide range of matters to be considered, and this important debate gives us an opportunity to discuss British Leyland and the industry as a whole. I shall consider all those wider issues, but I shall concentrate on those which are matters for the Government. There is a

slight problem of distinction here as to whether we were seeking to intervene, or whether we were trying to be too withdrawn. Those arguments have not addressed themselves to the procedural mechanism—a mechanism which is directly in accordance with the precedent followed by the previous Government. Therefore, when I discuss the timing of the debate and the provision of information, the hon. Member for Nuneaton (Mr. Huckfield) will no doubt be quick to remind me that in my time I have pressed for information from Ministers in debate. I understand that, but we must be sensible. The precedent is that the mechanism for discussing these matters is on a motion to take note of a statement on a corporate plan. That precedent has been followed by successive Governments.
I enjoyed the remarks of the hon. Member for Birmingham, Stechford (Mr. Davis). I listened with interest and curiosity, as did other hon. Members, because many of us wondered whether a Whip could still manage to raise a gallop on his feet—which he did. We recognise that his experience as a manager in BL gives him a useful standpoint. But when he complained about the quality of information, he was complaining about the NEB response both to the corporate plan and to that wider document. There are difficulties. I had the same difficulties when I tried to use the same argument when we were in opposition. Having now had the opportunity to look at the problem from both sides of the House, I am much more in sympathy with the sort of arguments put by the hon. Member for Nuneaton than perhaps I was at the time.
However, there is the problem of providing such information as was available as at December 1979; and there is the genuine problem of commercial confidentiality. All hon. Members would wish so to arrange matters as to make debates such as this valuable. The debate has been valuable, and we have received the benefit of hon. Members' experience in putting their views and suggestions of both management and trade unions. But we must not stray into areas which simply make the commercial standing of BL more difficult in a tough, competitive world.
My right hon. Friend the Secretary of State has made a statement, a document has been provided from the NEB, and the timing of the debate has been so arranged that we have had an opportunity to see the annual report and accounts of BL. As the hon. Member for Nuneaton said, copies of the annual report and accounts were in the Library earlier this week.

Mr. Les Huckfield: The hon. Gentleman is in danger of seriously misleading the House. The only information that was provided to the House of Commons, and upon which we are supposed to be basing our debate today, was the statement issued by the NEB last December. Through the House of Commons Library I was able to get further detailed information on the company's first press statement on its annual figures, which was issued in March. I did not get that through the Department of Industry. I got it through the Library. Only by pressing the Minister of State's office this week was I able to get that far. The annual report and accounts to which the Under-Secretary referred are still not in the Vote Office. The sum involved is £1,000 million of taxpayers' money, and we cannot read about it.

Mr. Marshall: The hon. Gentleman should know from his experience that annual reports and accounts are not put into the Vote Office. However, at our own instigation we made sure that copies were in the Library, and they have been available this week.

Mr. Huckfield: At my instigation.

Mr. Marshall: I leave it to the hon. Gentleman to decide whether he wants to claim credit for that. The fact is that the annual report and accounts have been published since April. Any hon. Member who wanted to take an intelligent interest in these matters knows that these can be obtained freely from the company. There is a limit to how far we should go down the tortuous path of who did what in relation to making available the annual reports and accounts which have been freely available since April.
We have had the opportunity to have the debate, the annual report and accounts having been made available and the annual general meeting having taken

place—a substantial input of information. The question is how we have been able to use that information.
We have had to consider the situation since last December, and in that respect in a sense all Governments are on a hiding to nothing about the timing of debates. When the statement was made in December, clearly there was then no time for a debate. The problem of a debate subsequently, which is not a matter for me, is related to events which are moving from day to day. We have seen the way in which the developments following the agreement by the Government to the financing of the corporate plan have begun to take effect, and the annual report and accounts and the annual general meeting yesterday have enabled us to look at the view of the company. I suggest that that has given us a fair basis on which to have a valuable debate.
I should like to state the Government's basic response to the corporate plan in its perspective. As I see it, this is principally concerned with matters of finance. If one had to characterise the view of BL and of the Government in these matters, I think one would say that the Government accept the need for the step-by-step approach. We think that there are problems in the marketing sense and in the whole way in which the company has sought to resolve some of its industrial relations problems.
I think that hon. Members on both, sides of the House have paid tribute to the progress that has been made. It is possible to make criticisms and objections, as did the hon. Member for Nuneaton, on the pay proposals. But—I do not think that this has been challenged by any hon. Member on either side of the House—there is a feeling that progress has been made in tackling these real problems.
Looking at the Government's financing of and support for the company, it is absolute nonsense to argue as the hon. Member for Dundee, West (Mr. Ross) argued. Unfortunately, the hon. Gentleman is not in his place. He seemed to imply that this was some kind of hand-to-mouth, stay of execution, approach. But £300 million is not chicken feed. It is a substantial sum of the taxpayers' money. It is a sum which pre-empts resources which hon. Members on both sides of the House argue might be directed


in other ways. These are substantial resources and this is a major commitment.
I remind the House that on page 15 of the annual report and accounts the view recorded by the company is:
 In addition to the funds to be provided in 1980, the Plan envisaged a requirement for a further £130 million of equity in later years. The Government will consider this in the light of BL's performance in 1980 and the 1981 Corporate Plan.
Therefore, further opportunities to consider these matters will arise on a step-by-step basis.
I turn now to a number of points made by the hon. Member for Nuneaton in his long and detailed speech. He raised a whole range of questions which, as I said earlier, I regard as matters for the company. There are a number of aspects of the corporate plan which the company will no doubt wish to consider in the light of what the hon. Gentleman said, and I recognise his diligence in putting a number of those points.
The hon. Gentleman raised the valid concern over the Honda and whether it should be allowed to be imported into France. The answer is that France is not in a position to ban the access of another Community-manufactured car. However, I recognise the type of approval that has to be obtained and the mechanism that has first to be overcome. It would be a matter of great concern if there were any suggestion that a ban was envisaged. If the hon. Gentleman has any evidence in that regard, I should be interested to look into it.

Mr. Huckfield: The Minister will be aware that BL is aiming at a 40 per cent. United Kingdom content and 50 per cent. United Kingdom value-added. The " Blonda" might be recognised by the EEC Commission as a European car, but there is no guarantee that the French will take that view. The company is still uncertain about whether it can get the car into France. Does the Minister recognise that that is important?

Mr. Marshall: I recognise the importance of the hon. Gentleman's argument. The question of the way the industry is changing and the point about international collaboration will be examined within the Community in the coming

years. I take on board the hon. Gentleman's point.
The financial situation was set out clearly earlier. The hon. Member for Nuneaton implied that there was a lack of a standby facility. Perhaps he has overlooked the fact that the package included a £150 million credit line facility which can be drawn on in need. That is in operation.
The hon. Member raised a number of wider issues which the company might wish to consider. It is not right for me to seek today to deal with such issues as marketing considerations and production management.

Mr. Huckfield: Will the Minister amplify what has been said about the standby facility? Does he recognise that the LC10 is critical? If it is not built, BL will no longer be able to regard itself as a major motor vehicle manufacturer. Is the Minister saying that as part of the standby facility the Secretary of State might be prepared to underwrite the LC-10 in some way? That is the type of guarantee that I had in mind.

Mr. Marshall: No, I am not saying that. The provision of that standby or credit line facility is part of the overall financing which the Government have agreed within the £300 million which was the subject of the statement last December. The take-up of that and the way in which it is used is a matter for BL. I have nothing to say to the House today on the question of the LC10. That is a matter for BL. I hope that the project will go ahead.
I turn to the question of imports about which hon. Members on both sides of the House have expressed anxiety. My colleagues in the Department of Trade have direct responsibility and there is a limit to how far I can respond. I appreciate the arguments.
The hon. Member for Nuneaton said that BL was locked into a complex international trading regime. In a sense that is true of BL, as it is of all car manufacturers. We must remember that the situation is evolving. We cannot expect to find easy and happy short cuts as we try to solve the problem. With the Japanese car industry there are inter-industry voluntary restraints. We


have made it clear that we attach importance to that. They have worked pretty well within the parameters.
Hon. Members have asked about Spain. We must seek to act in concert within the Community. Representations have been made through the European Commission and direct with Spain. I agree that the present discriminatory position is intolerable. These matters will continue to receive further attention. However, we are entitled to look at them in relation to the proposal that Spain should become a member of the EEC. The attitude of future trading partners is relevant to those negotiations.
The Government continue to keep a close watch on imports from Eastern Europe. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) has had to leave the Chamber, but he has sent his apologies. He is particularly concerned about such imports and their relationship to the dealer network. Indeed, other hon. Members have also expressed concern. I recently had an opportunity to talk to representatives from the British Leyland dealer network. I understand the significance of their concern that imports from Eastern European and other countries may siphon off key elements in the dealer network. In turn, that may seriously undermine British Leyland's ability to sell cars in Britain.
If we wish to make an argument about anti-dumping, we must prove injury. The level of imports—at 2 per cent.—is relatively small. I appreciate the point made about the low-priced bottom end of the market and the consequent concentration of East European trade. There is scope for continuing consultation. It is in the interests of Eastern European exporters—if there is a price differential—to see that it is not maintained. At that level of trade, they have no particular incentive to sell at below a proper and remunerative cost.
The wider question of imports is interrelated with international collaboration. I am glad that the hon. Member for Nuneaton gave his clear support for ventures such as the British Leyland-Honda deal. That deal is part of a valuable international development which will help us to see our import problems in a better perspective. The hon. Member for Dundee, West was perhaps foremost in his criticisms of the level of imports.

However, it is a two-way trade. He spoke about the effect of imports on our components industry. However, the House will be aware that this country has a considerable trade in castings for Volvo and Saab in Sweden. There is considerable trade in respect of diesel fuel injection components for General Motors from Lucas. Several examples could be given of two-way trade.
I hope that there will be future developments in international collaboration, and that they will prove mutually beneficial. The collaboration between British Leyland and Honda will be a test case. We shall have to see whether it resolves the problem of British Leyiand's middle range in a shorter period than might otherwise be the case. We shall have to see whether we can achieve a healthier approach.
I recognise that hard, difficult and tough decisions have had to be taken, which affect constituency interests. The hon. Member for Birmingham, Erdington (Mr. Silverman) spoke about his constituents. His points were entirely legitimate and I understood what he had to say. However, he was less fair than usual when he spoke about my right hon. Friend's reaction to his suggestion for discussions. I saw the correspondence and I shall now speak from memory. I recall that it was suggested that the Government felt that these decisions had been reached on a commercial basis, and that they could not intervene. They did not wish to take up the hon. Gentleman's time by discussing rehashed arguments. The Government did not believe that those discussions could effectively be reopened. However, the Government are willing to see the hon. Gentleman. If matters were left as they were, it was because we did not think that we could help him. However, if hon. Members wish to raise such matters with the Government, we are always willing to consider that.
However, the hon. Member raised one point of significance. He argued that the recent 5 per cent. wage increase, together with further productivity conditions, related to a going rate. He talked about 20 per cent. That is part of the danger of trying to live in a twilight world in which one does not have an incomes policy or free collective bargaining. I should like to know which side of the


fence the hon. Member wants to be on. As far as I am concerned, this is a typical example of responsible free collective bargaining. The hon. Member for Nuneaton would argue that it had been imposed, but the fact is that the levels being considered related to the competitive pressures and the particular difficulties facing the company. That is a more realistic and sensible way of going about the matter. The increase was related to the future of a company which must not price itself out of the market on wages. That would not be in the interests of any one in this country.
One of the arguments that always appeals to me about a Friday debate is that one has a chance to go into details and to draw on the expertise of hon. Members. Very often under the pressures of mid-week debates, we do not get the same input. The contributions today have reflected this.
My hon. Friend the Member for Bromsgrove and Redditch gave the hon. Member for Nuneaton a left and a right, but he took it in good part. Perhaps he recognised that a number of points that were put by my hon. Friend were valid, particularly when he spoke about the dealer network and import penetration. My hon. Friend the Member for Oxford (Mr. Patten) was also sensible in arguing the case against overly detailed examination of the corporate plan today. I believe that we have struck the right balance in looking at these matters. My hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) was helpful in reminding the House that the value of the United Kingdom component industry as represented by British Leyland is about £2,000 million. This emphasises that there is an important inter-relationship, and above all, when we come back to the question of imports, there is a crucial relationship between British Leyland's own trading needs and the needs of the country as a whole.
British Leyland is our largest manufacturing exporter. In many ways it takes a very different view from that urged by some hon. Members who seek protection ism. BL's own thinking must weigh most heavily in all our thinking—

Mr. Silverman: Has not the view of

Sir Michael Edwardes himself swung in favour of import controls of some sort?

Mr. Marshall: I think that the hon. Member has confused Sir Michael's interest in the "Buy British" campaign, which is perfectly legitimate, with the call for import controls. In this regard British Leyland and the rest of the vehicle industry does not take that view. After all, the 250,000 vehicles that British Leyland exports every year were worth £800 million last year and as a major exporter, BL is very much aware of its reputation. The component industry, too, because of its commitment, is very well aware of the arguments for free trade. We cannot pull ourselves out of the world at large. If we talk about the industry, we are talking about an international industry.
One-half of the United Kingdom's motor assembly industry is overseas-owned. That is another matter which some hon. Members argue has implications for the freedom to move component manufacture and so on. But our major component companies and BL also have key subsidiaries overseas which attract substantial earnings. I remember from my time in India the BL activity in that country which is a significant operation and in many ways a springboard to trade in the Third world. It is a two-way street.
If British Leyland realises why international trade and an open market are important, I accept that where action can be taken the Government will want to do all that they can to help. I have tried to outline some of the specific areas in which the Government will act.
Beyond that, the way that the Government have shown a commitment to help BL by putting forward funds and looking to those being remunerated by dividends in future is an expression of faith in the way in which BL, on a step-by-step, phased approach, hopes to make progress and return to a more competitive framework.

Mr. Ernie Ross: I had to leave the Chamber during the hon. Gentleman's speech and I apologise if he has covered this point, but I stated that one of the major drawbacks in developing British Leyland as a British industry is its failure


to go ahead with the aluminium foundry plant.
If the Under-Secretary has not covered that point, will he comment on it? I am sure that he understands the necessity for us to produce our own aluminium castings if we are to retain an indigenous motor car industry.

Mr. Marshall: I did not cover that point, except to the extent that I covered a number of other aspects by saying that they are specific matters for BL. I am sure that the company will take note of the hon. Gentleman's remarks, but if we tried to make decisions on what is right or wrong in such matters we would be moving down a dangerous path of the worst possible sort of intervention. I accept the hon. Gentleman's interest in the matter and I am sure that his point will have been taken on board.
The debate has been valuable and I believe that we should take note of my hon. Friend's remarks and the speeches in the debate and wish British Leyland a fair wind in its future efforts.

Question put and agreed to.

Resolved,
That this House takes note of the statement made on 20 December 1979 by the Secretary of State for Industry about the British Leyland 1980 corporate plan.

TOBACCO AND ALCOHOL

Motion made, and Question proposed, That this House do now adjourn.—[Mr. MacGregor.]

Mr. Tristan Garel-Jones: I am grateful for the opportunity of raising this important subject. My purpose is not to discuss the merits of the case against smoking and drinking but simply to underline the fact that most reasonable people accept that abuse of tobacco and alcohol causes serious damage to health, not to mention the economic and social side effects.
It is also common ground that it is legitimate for the State to seek to discourage the abuse of those drugs and that one of the weapons in its armoury is the imposition of duties. It is an open secret that my right hon. and learned Friend the Chancellor of the Exchequer wished to

place heavier duties on tobacco and alcohol in his recent Budget but was inhibited from doing so by the effect it would have on the retail price index. Suffice it to say that a 10 per cent. increase in the price of alcoholic drink and tobacco would increase the index by 1·22 per cent.
The fact that this inhibition has had an effect on successive Chancellors of the Exchequer can best be illustrated by taking the price of a bottle of whisky and a packet of 20 cigarettes as a percentage of gross earnings in October 1945 and October 1979. For whisky, the figure was 21·3 per cent. in 1945 and 4·9 per cent. in 1979. For a packet of 20 cigarettes, it was 1½7 per cent. of gross earnings in 1945 and 0·7 per cent. in 1979. For those items to have maintained the same cost in relation to gross earnings, the price of a bottle of whisky today should be £20·60 and a packet of cigarettes £1·60. That is the effect over the years of the inhibition.
Support is growing for the Chancellor and his successors to be given a free hand to tax these drugs as severely as they deserve. Suggestions have been put forward to give Chancellors more freedom of action. I shall outline the main suggestions in the hope that my hon. and learned Friend will give the House an indication of which suggestion, if any, the Government feel merits further consideration.
The first, and superficially the most attractive, is to remove alcohol and tobacco from the RPI. Referring only to tobacco, that suggestion was made first by my right hon. Friend the Member for Worthing (Mr. Higgins). Support has come from both sides of the House. However, at the end of the day, my hon. Friend the Financial Secretary may prove to have been right in saying that the purpose of the RPI is to measure what happens to the retail prices of the items that people buy. People buy cigarettes, tobacco and alcohol, although some of us may regret that. An index that excluded them would not be regarded as properly measuring retail prices. The Financial Secretary is merely saying that the RPI is the RPI is the RPI. Blunt and crude instrument though it may be, I suspect that it will remain the RPI for some time to come.
Another suggestion mooted is an alter native index, which would not take account of the cost of dying, to borrow the


expression of my right hon. Friend the Member for Worthing. Few hon. Members have a more honourable and consistent record in the fight to raise the levels of assistance given to poor families than my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who had hoped to be present today. He points out that those of us who hope that the Government are committed to regular uprating of child benefit, linked to the RPI, cannot argue that that linkage should take place with the RPI as it stands. I have already pointed out that a 10 per cent. increase in the costs of alcohol and tobacco would push up the RPI by over a point and add £33 million to the cost of child benefit. None of us could argue that an increase in the cost of alcohol and tobacco would add one penny to the cost of supporting children.
When arguments about the effect of a rise in prices on needy families are advanced, the RPI is quoted. However, it takes no account of family size and makes no distinction—nor should it—between essential and non-essential items. What are the Minister's views on setting up a family budget index which would include only those items essential to the budget of poor families with children? I do not advocate such an index as a challenge or alternative to the RPI, but it would give us a clearer and more accurate picture of the problems facing the poor.
The third possibility is to index-link the duties on alcohol and tobacco to the RPI and increase them quarterly by at least the amount shown in the RPI. That would have several advantages. First, it would stop dead the trend over the past 30 years for those drugs to become steadily cheaper. At the least, their prices would keep pace with other prices. Secondly, by uprating on a quarterly basis, the increases would not have such a direct step effect on the RPI. Thirdly, the Chancellor would retain the option to increase the duties by more than the figure indicated in the RPI.
I cannot end without referring in general terms to the general knock-on effect that the RPI figures have on the wage bargaining process and on the most important role that the trade union movement could play in this area, although I recognise, of course, that to do so goes beyond the area of responsibility of my

hon. and learned Friend the Minister of State.
The trade unions are in business to get the best wage bargains that they can for their members. In the conduct of their negotiations, it is obvious that they will use the RPI as a marker and a bargaining counter. The trade unions are also rightly proud of the role that they have played in ensuring the health and safety of their members.
I draw attention to some recent remarks by Mr. John Ellis, the national welfare officer of the Civil and Public Services Association, Britain's biggest Civil Service union. He said:
 There is growing danger to health from alcohol throughout our society. Alcohol ought to be treated in the same way as soft drugs.
He went on to talk about the growing trend of midday drinking and the danger that this posed to workers in industry in control of machinery, and so on.
I appreciate that this is outside the scope of the Treasury's responsibilities, but I ask my hon. and learned Friend to comment on and speculate about the possibility of the Government and the TUC agreeing to disregard the alcohol and tobacco input in the RPI in wage bargaining. If the TUC was prepared to move with the Government on that front, I believe that it would make perhaps the most significant contribution to the health, welfare and safety of its members that it has made for many years.
I believe that the widespread concern expressed from both sides of the House about the impact made by alcohol and tobacco on the RPI and its effect on the capacity to levy duties thereon cannot and should not be ignored any longer. I hope that my hon. and learned Friend will be able to give some intimation that the Government are now considering seriously ways of resolving this problem.

The Minister of State, Treasury (Mr. Peter Rees): I offer my congratulations to my hon. Friend the Member for Watford (Mr. Garel-Jones) on raising an issue of prime importance which we have touched on only cursorily in our debates of late.
The matter was raised during the Budget debate, and the House will recall that my right hon. and learned Friend the Chancellor of the Exchequer said on 1


April, when winding up the Budget debate, that he was willing to listen to arguments that tobacco and alcohol should be removed from the RPI, which is one of the prime suggestions of my hon. Friend the Member for Watford.
However, my hon. Friend will recall that during the Second Reading of the Finance Bill, as recently as 8 May, in answer to my right hon. Friend the Member for Worthing (Mr. Higgins) to whose contribution in this area J pay tribute, my right hon. Friend the Chief Secretary said that this might be a matter for consideration by the Treasury and Civil Service Select Committee. Indeed, there may be competition between the various Select Committees about which should take on board this prize, if it is a prize, but, as I am charged only with certain limited responsibilities, it would be inappropriate for me to commend it to any other Select Committee. I am not sure that it is altogether appropriate for me to recommend it to the Treasury and Civil Service Select Committee, which is appropriately at arm's length with the great Department with which I am associated.
The comments of my right hon. Friend the Chief Secretary were endorsed enthusiastically the next day by my right hon. Friend the Secretary of State for Social Services.
It is right to observe that the retail price index has become in our society and in public life a yardstick of importance. I need not go over the ground which has been covered so eloquently by my hon. Friend the Member for Watford. In the fiscal area, it governs the threshold to a degree. In the area of social security, various benefits ultimately, directly or indirectly, are determined by it. As my hon. Friend has pointed out, wage negotiations are considerably, if not explicitly, affected by the retail price index.
It is fair to observe that successive Chancellors of the Exchequer, judged by their public utterances and not from any indiscretions at the Treasury, when considering fiscal changes, have been affected by the impact of what they might be doing on the retail price index. It might interest the House to know the weighting of the particular ingredients in the retail price index at 1980. Tobacco represents

4 per cent., beer 4·9 per cent., spirits 2·2 per cent. and wines 1·3 per cent. That is a fairly considerable element. As my hon Friend has pointed out, this means that the RPI cannot really be regarded as an absolutely accurate indicator of what the average family consumes.
The impact of this year's proposals on the RPI, as reflected in this month's increase, is 1·1 per cent. That covers the whole raft of indirect tax measures. The duties on alcohol represent about 0·4 per cent. and tobacco 0·3 per cent. It is fair to observe that the increases this year represent only one year's revalorisation and do not take us back to 1977, the last occasion when there was a substantial increase.
My hon. Friend has properly and relevantly put the case on health grounds. It would not be appropriate for me to analyse the evidence; my hon. Friend and the House have it well in mind. It would probably be a more appropriate subject for a Minister from the Department of Health and Social Security. If, however, I may be permitted one observation, I feel that possibly the health case against tobacco is slightly stronger than that against alcohol. I do not know whether I am expected to develop that theme or set any personal example. I do not see myself as the Mendes-France of the Treasury team, confining myself to milk. It is not perhaps for me to draw attention to the stern puritan approach of my hon. Friend, limited though that approach may be.
My hon. Friend has raised several practical proposals, the first being that alcohol and tobacco should be removed from the RPI altogether. The House will know that the Government do not have direct responsibility for the RPI. An advisory committee reports to my right hon. Friend the Secretary of State for Employment. The difficulty is practical. If one constructs an alternative index, how long will it take to command the interest and respect of those who have to determine their actions, in any degree, by reference to it? That is a matter of speculation, but it could and should be considered.
To get the problem in perspective, may I say that I had an analysis prepared of the difference it would have made if alcohol and tobacco had been excluded from the RPI at January 1980 and preceding


years. The percentage change in the RPI in 1980 over the previous January was 18·4 per cent. If alcoholic drink and tobacco had been excluded, the increase would have been 18·2 per cent., a difference of only 0·2 per cent. That was obviously before any considerable alterations in duties had taken effect, leaving aside perhaps VAT, the full effect of which had not worked through. It is interesting that there was not a very considerable difference.
Taking the position in January 1979 against the position in 1978, if alcohol and tobacco had been excluded, there would have been an increase, curiously enough, in RPI. The increase over the preceding year on the existing RPI was 9·3 per cent. If alcohol and tobacco had been excluded, the increase would have been 10½1 per cent. That is a curiosity that reflects on the indirect taxation policies of the previous Administration. We know from their published utterances that they were deeply concerned about the impact on wage bargaining and other similar matters.
In 1978 the increase over the previous year's RPI was 9·9 per cent. If alcohol and tobacco had been excluded, it would have been 9·8 per cent. I could take the House back to 1975, but I merely say that the pattern remained the same. The impact is not as considerable as my hon. Friend might have supposed. I know that he has undertaken considerable research. He could argue that if my right hon. and learned Friend the Chancellor of the Exchequer were to introduce the increases that he is canvassing the difference might be much more considerable. He could also argue that only minor discrepancies have been revealed because we were in an era when Chancellors were rather more sensitive to the possible impact of such increases.
Could we construct an alternative index for specific purposes? Should we have a family budget index? My hon. Friend takes a close interest in child benefits, and, as he has fairly said, the RPI is not an accurate measure of the cost of bringing up children. The general observation may be made that, whatever alternative or specialised index were to be constructed, it would have to command approval and understanding in the areas in which it was to be used. To a

degree, we have a pensioner index. There are measurements of how price changes or fiscal charges have an effect on pensioners.
My hon. Friend asked whether duties being index-linked and revalorised quarterly. Some duties are ad valorem. We know that VAT, which is one of the biggest revenue raisers in the Chancellor's bag, is ad valorem. My hon. Friend's proposition would mean restructuring many of our indirect taxes. I agree that we should not shrink from that, although the administrative upheaval would be fairly considerable. We should never be oppressed by that, although it is a factor that should be taken into account.
As my hon. Friend will be aware, it would probably be necessary to collect the duty on alcohol at an earlier stage. As I said briefly in my reply on Second Reading of the Finance Bill, it would probably mean shifting the alcohol duties to the retail outlets. I doubt whether that would be entirely welcomed by those outlets. However, if it were to be shown to be in the national interest, it would have to be contemplated. My hon. Friend's proposal might make calculating difficulties for the tobacco companies. It might be necessary to consider pushing collection forward and collecting at retail or wholesale outlets. There are difficulties—I do not pretend that they are insuperable—that have to be taken into account.
My hon. Friend suggests, perceptively, that revalorisation should be quarterly. There would be a considerable element of forestalling. For example, it would not be beyond the wit of the public to discover what the change in the RPI had been and to rush out before every quarter day to stock up their cellars or tobacco cabinets.

Mr. Garel-Jones: That happens before Budget day.

Mr. Rees: As my hon. Friend correctly says, the gloomy assumption is nearly always made that the Chancellor, of whatever party, will increase alcohol and tobacco duties. There is considerable forestalling in the week or month before the Budget. My hon. Friend's proposition would produce an interesting change in the pattern of retail sales.
My hon. Friend will not expect me to come to any firm conclusion at this stage.


He has raised a far-reaching issue that requires careful examination. The side effects in areas for which I am not directly responsible may be considerable. That is why I commend the suggestion that one of the Select Committees should take the issue on board.
My hon. Friend raised the question of wage negotiations. I am not qualified to speak on that subject, but I am sure that certain members of the trade union movement would see the force of his observations. They are responsive to their own electorate—the people for whom they are negotiating. Though they may be impressed by the health argument advanced by my hon. Friend—for which I have a certain sympathy—equally those on whose behalf they are negotiating may be less responsive to that kind of argument. It is no good their negotiating for their members a deal that may be good for the health of their members but not so good for their pockets. We must take into account certain realities, and that is perhaps as far as we can take this interesting question today.
I congratulate my hon. Friend, who is right—dare I say it to him and to the House—to force this particular question

upon our consciousness. It is a matter that we shall need to examine more widely and deeply. Whether that can more appropriately be done on the Floor of the House, before a Select Committee or before some outside body is no doubt a matter for debate.
We are grateful to my hon. Friend for having raised the matter, and if I have not given him an absolutely conclusive answer I hope at least to have demonstrated to him that we have not entirely neglected the question. We have reflected upon it, but it is a matter that will demand over the weeks, months and perhaps years to come considerably deeper examination than we have been able to give it today.
The more these problems are aired, the more our fellow countrymen will, I hope, come to realise that if a different yardstick is to be contructed by reference to which we are to determine fiscal, and indeed other, questions perhaps we should be more conscious of the health implications which my hon. Friend has raised today than we have been in the past.

Question put and agreed to.

Adjourned accordingly at four minutes to Two o'clock.